Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Business Insider looked at the China’s state owned enterprises that continue to pump out steel even though the demand is not there.
With China’s leadership transition slated for the fall, employment stability is paramount and China’s large steel manufacturers are obliging the government by keeping the mills running:
“Common feedback was that smaller producers still generate some profit and large SOEs that are generating higher losses would not shutdown production given the impact on employment,” according to a note by [Goldman analyst Marcelo Aguiar].
And this combined with lack of demand is expected to push local steel prices even lower.
President Hu Jintao will be leaving his post later this year at China’s 18th Congress.
Iron ore prices have been dropping to multi-year lows, taking many large iron ore miners down as well.
