The slump in the mining industry has been squarely blamed on a fall in demand from China. But how fair is that, and how much of the worlds metals and minerals are consumed by the Peoples Republic?
Well, according to the BBC, China accounts for a full 70% of the worlds iron ore consumption, and thats certainly hit Rio Tinto (LSE: RIO) hard. Almost half of Rios turnover in 2014 came from iron ore, and in the first half of 2015 the firm saw production rise by 11% to 154 million tonnes.
BHP Billiton (LSE: BLT) is in the line of fire too, deriving around a third of its annual turnover from iron. And yep, production is on the up there too, with Western Australia output up 13% to 254 million tonnes in the year just ended.
With the price of a tonne of the stuff having plunged from $187 in February 2011 to just $57 today, its really not surprising that Rio Tinto shares have lost 48% over the same timescale, to 2,368p, or that BHP Billiton is down 55% to 1,055p.
Other metals
Theres not a lot of support from the two companies other products either, with Rio getting around 25% of turnover from aluminium and 13% from copper, and BHP attributing 21% to copper according to the same statistics, China takes in 50% of the worlds nickel and aluminium and 45% of its copper. Oh, and it consumes a lot of BHPs petroleum products and potash too.
Copper production is good for Antofagasta (LSE: ANTO) when times are good, with more than 90% of its annual turnover coming from the shiny brown stuff. But were looking at more than three quarters of the companys annual production being swallowed up by Asian countries although high-tech Japan consumes 37% of it, so theres some ease there.
Antofagasta saw its share price tumble 61% between February 2011 and the middle of August this year, but since then its ticked up 11% to 592p as copper prices have started to firm up again although a minor reversal in the past few days has got investors twitching again.
Wider diversity
Glencore (LSE: GLEN) has also seen its share price stabilise a little after it announced a debt-reduction programme, but the price is still down a massive 76% since mid-2011, to 124p. Does Glencores move signal the bottom for the sector and is it the best bargain now? Well, with its much more diversified portfolio of products, the company is more insulated from a slump in any individual product, and more than half the firms turnover comes from energy products with less than a quarter coming from metals and minerals but China is a huge consumer of those too.
The bottom line is that China really is the global driver of the mining business, and when it suffers a slowdown, everybody hurts. But theres an upbeat side to it all Chinas slowdown has left it with annual growth of only around 7%, which is racing ahead by the standards of most countries. And though were likely to have a few slower years as the country adjusts to its changing economic focus, the big miners should make for good long-term investments at todays prices.
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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.