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More iron ore mines to shut in China

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SYDNEY (REUTERS) -
This year's sharp drop in iron ore prices could force China to close up to 80 million tonnes of domestic mine production, more than a fifth of its total annual output, consultancy Wood Mackenzie said on Monday.

China's domestic industry is highly fragmented, with producers in coastal areas believed to be facing some of the highest costs in the country -- well above the price of imported ore.

Wood Mackenzie analyst Andrew Hodge said that further mine closures would likely benefit Rio Tinto , BHP Billiton and Fortescue Metals Group, which mine the Australian Pilbara iron ore belt on much higher profit margins.

Brazil's Vale would also gain, he said.

Hodge estimated at least 40-50 million tonnes of higher cost Chinese mine production, mostly in coastal areas where iron ore is typically of lower quality, was already earmarked for closure.

When iron ore prices plummeted as low as $60 a tonne in 2009, China saw "huge closures" in the domestic sector as local miners were unable to operate at a profit, he said.