China hit hard by price warWhile reduced iron ore demand from China has been identified as the driving force behind Vale's decision, the country's iron ore imports have actually increased as the price war between industry giants has forced it to cut back its own output. In fact, the China Iron and Steel Association (CISA) reported that China is now importing over 80 percent of its iron ore, with the country's output falling by 9 percent during Q1. "It's common for domestic iron-ore mines now to be running losses, cutting production or completely halting production," CISA Executive Vice Chairman Zhu Jimin told The Wall Street Journal on Wednesday. "We are not on a level playing field with global miners. We need to lessen the burden on our iron ore mines." Whole communities in China have reportedly been experiencing major shut downs, such as Qian'an, which is home to about 60 iron ore mines. About 90 percent of its small, privately owned mines have closed down or become "ghost mines." Price war continues Though Vale is making moves to cut its output, Rio Tinto (ASX:RIO,NYSE:RIO,LSE:RIO), the world's lowest-cost iron ore producer, is still refusing to do so, with CEO Andrew Harding defending the company's expansion strategy in a Financial Review article. Harding said he is "very surprised" that critics find the expansion to be a problem. "People are making it sound like it is not in the national interest, when all we are trying to do is maximize the long-term value of the business," he told the news outlet. Meanwhile, news surfaced Thursday that the Australian Competition and Consumer Commission (ACCC) has decided not to take action against Andrew Forrest, chairman of Fortescue Metals (ASX:FMG), after he alluded in March to forming a cartel with other big iron ore players. The ACCC accepted that the comments, which were made at a dinner event in Shanghai, were hypothetical.
It will be interesting to see how these major players continue to react to moves in the iron ore price moving forward.Securities Disclosure: I, Kristen Moran, hold no direct investment interest in any company mentioned in this article. Related reading: Iron Ore Price Up on News BHP Will Slow Expansion Top Iron Ore Miners Still Trying to Muscle Out Competition How Long Will the Global Iron Ore Surplus Last? Big Iron Ore Producers Debate Supply-Demand Balance Iron Ore Price Rally Comes to a Halt; Vale Plans to Reduce Output from Iron Investing News