That's untrue. Please refer toan excerpt from the SMH article a few months ago below:
"
Both Vale and Fortescue need a benchmark price of about $US40 a tonne to break even while BHP Billiton and Rio Tinto require about $US25 a tonne, Citigroup analyst Alexander Hacking said. Those break evens – the price at which the miners are not making or losing cash – have been calculated on an earnings before interest, tax, depreciation and amortisation basis (EBITDA)
Read more: http://www.smh.com.au
It stands to reason that if big players like Vale and FMG have a break even COP of $40, that if the price goes below that it will take over 40% supply out of the market which, in turn would cause acute supply problems.
IMO, China will want to keep Vale & FMG alive to maintain downward pressure on price unless china wants to buy either
for a song and risk the short term spike in price. For this reason it would make sense for China to buy out FMG and then maintain
oversupply in the longer term. Just look at what China has done with coal. They have bought out Mongolian mines and
they can maintain oversupply from these break even businesses to maintain downpressure on Australian and other foreign suppliers.
The sensible solution is for BHP, Rio & FMG to cut back production by 10%. As such they will generate more revenue with lower costs. Twiggy re-advocated this last Friday.
