The slowdown in world industrial production will be bad news for prices for shares of BHP Billiton and Rio Tinto

Sustainable economic growth in China will allow the domestic production of steel next year to exceed 800 million tons. This was announced by Lee Xinchuang, Deputy Secretary General of the Chinese Association of ferrous metallurgy.

For the production of one ton of cast iron, an average of 1.5 tons of iron ore is required. It is easy to calculate that China next year will need at least 1 billion 200 million tons of high -quality iron ore raw materials.

BHP Billiton and Rio Tinto have already announced their desire to increase mining power by one and a half times. BHP officially reported that in 2014, the total ore mining will exceed 265 million tons. BHP and Rio are by no means the only manufacturers of iron ore, but they supply the lion's share of Australian raw materials. Given that China has been producing a little less than half in the world for the past four years, it has always been and remains the most capacious market.

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However, everything can change. It seems that world industrial production reaches the maximum. If so, then the production of steel will be reduced, along with the increased need for iron ore.

The question of the reaction of prices to iron ore remains. Historically, we witnessed sharp reductions in iron ore prices against the backdrop of doubts about the stability of industrial production in China. In any case, the five -year plan of the accelerated development of the PRC will end in four years.

The price of shares of mining companies BHP Billiton and Rio Tinto is directly dependent on iron ore prices and enterprises still have time to reduce production costs, increase the operational margin and the total profitability of production. At the same time, the price of iron ore can become much lower if demand is insufficient for the current level of production.