China's demand slows down the performance of mining giants

BHP Billiton (BHP), the world's largest mining company, announced that its net profit in the second half of 2012 has dropped by 58% in a matter of days. On February 25th, BHP’s outgoing chief executive Gao Ruisi told the media that in the coming years China's demand for minerals will grow at a slower pace, which will force miners to focus on cutting costs. Gao Ruisi said that "the next five years, China's annual demand for mining products will be reduced from 15% to 20% to 2% to 4%."

Not long ago, Rio Tinto, the world’s second-largest iron ore producer, announced a net loss of US$3 billion in 2012. This became Rio Tinto’s loss for the first time in history. BHP Billiton’s half-year profit fell by 60%, together with market expectations. Brazil's Vale, a loss-making company, has changed its performance in the three major mines.

“As the economic growth rate of emerging markets slows down, the growth rate of mineral demand has declined significantly, and the profitability of international miners in 2012 is not very satisfactory.” According to He Hangsheng, editor in chief of the steel branch of the business community, “Although 2012, the ore prices were The miners are a profitable year, but from a global point of view, the ore production capacity is showing a booming growth, and the tight global supply of iron ore is expected to reverse.To compete with Vale ore business, Rio Tinto and BHP Billiton should be strong. Unite to form a strategic partnership."

Although the world’s largest iron ore supplier Brazil’s Vale did not release its 2012 season report. However, the company’s net profit fell by 66% in the third quarter, the worst level in the past three years. In addition, the company also suspended the production of these two furnaces in June 2012 due to problems with Vale's two furnaces in the Onca Puma nickel project in Brazil. At the same time, with the company's assessment of OncaPuma project and aluminum assets, Vale confirmed that the pre-tax impairment of aluminum nickel assets was 2.848 billion U.S. dollars, of which the pre-tax impairment of aluminum assets was 1.3 billion U.S. dollars.

From the above analysis, He Hangsheng pointed out to reporters: “The Brazilian company Vale's profit in the fourth quarter of 2012 will be impacted. In recent years, the performance of the three major mines is closely related to emerging economies, especially the Chinese economy. The economic growth rate of the economy has slowed down significantly, and the demand for commodities such as iron ore, copper and crude oil has been suppressed, and the rapid growth of mine performance has changed.”

It is worth mentioning that while the mining giant announced its performance, the replacement of the CEO came into being. The reporter learned from BHP’s latest personnel announcement that the company’s CEO Gao Ruisi will leave after more than five years of service. The departure date will be set for May 2013. The successor will be Andrew Mackenz, head of the company's non-ferrous metals division. In response, industry sources told reporters that South Korea-born Goreth suffered long-term losses due to a series of transactions including the failure of the acquisition of the main competitor Rio Tinto Group, as well as the company’s US shale gas business and the huge write-down of Australian nickel assets. Accused, BHP Billiton’s approximately $200 billion deal was abandoned within five years of its service.

Up to now, the world’s top five mining giants including BHP Billiton, Rio Tinto, and Anglo American Resources have all completed the adjustment of their chieftains.

As the largest buyer of iron ore in the world, China’s steel enterprises have restricted the production due to their difficult survival in 2012, forcing import miners to have to “low their heads”.

“Despite the fact that the ore prices have experienced great ups and downs in 2012, 'two extensions' have been operating in poor conditions, but in the iron ore field, it is still a profitable year for miners.” He Hangsheng pointed out that as China’s demand weakens and supply continues, As the volume continues to increase, it will be difficult for iron ore to continue to contribute substantial profits. The profits of the international mining giant may have passed.