China may look elsewhere for iron ore

Smaller iron ore producers in Western Australia will be the big winners after the collapsed Rio Tinto-Chinalco deal.

Smaller iron ore producers in Western Australia will be the big winners after the collapsed Rio Tinto-Chinalco deal and the negative feelings it has created, Fat Prophets’ head of mining and resources research Gavin Wendt told MINING DAILY.

According to Wendt, the failed Chinalco deal, coupled with belief in China that the subsequent Rio Tinto-BHP Billiton joint venture will create a monopoly, will see Chinese steel makers look to alternative sources for iron ore.

“The beneficiary out of all of this is going to be a lot of up and coming iron ore players around the world, particularly in Western Australia,” he said.

“From a business sense it makes sense for the Chinese not fall victim to a virtual duopoly in the iron ore business.

“That could mean Fortescue, and also many other smaller players over there in WA.”

News of the scrapped Rio-Chinalco deal last Friday saw Fortescue shares jump 52%, with a further 20% increase today.

Fortescue shares were last trading at an eight-month high of $4.27 a share.

The sudden soaring of it share price saw the Australian Securities Exchange (ASX) issue Fortescue with a price query, asking why the company’s shares had risen so sharply.

Fotescue responded by saying that it had complied with all rules and did not know of any unannounced information that could have triggered the price rise.

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