than at home.
Some 100 million tonnes of low-quality Chinese production had become unprofitable in the past month or two and is ripe for closure, making room for more imported ore, even in a falling market, mining executives estimate.
In Australia, Fortescue, Atlas Iron and BC Iron are also lifting output, though they face higher costs.
BHP and Rio Tinto boast some of the world's lowest production costs of around $20-$30 per tonne. That provides a strong competitive advantage against domestic Chinese production, which can run as high as $100 per tonne.
Australia's iron ore exports to the world's biggest steelmaker have grown at more than double the pace this year of China's total iron ore imports. In the first eight months of 2012, official data showed China imported 8.7 per cent more iron ore than a year ago. But imports from top supplier Australia rose by 20 percent to 222.7 million tonnes.
Australian miners are also benefiting from restrictions on iron ore exports from India, which is attempting to keep its own steel industry well stocked with raw materials.
A shift away from once-a-year pricing of ore in favour of shorter term contracts also means lower returns on sales. That's because the more ore is sold at spot, the less smaller suppliers can compete with the mega-producers -- namely Vale, Rio Tinto and BHP who enjoy vast economies of scale and together control more than 70 per cent of the global seaborne market.
Counting on demand
The producers are obviously counting on demand remaining up, said Fat Prophets mining analyst David Lennox. But the risk is if the pace of the slowdown in China GDP accelerates, creating less need.
Rio Tinto on Tuesday said it was sticking with its 2012 production target of 250 million tonnes after reporting September quarter output rose 5.6 per cent from a year ago.
Fortescue, which also runs mines in the Pilbara area of Australia's northwest, plans to decide by December whether to restart work on its Kings mine, which could nearly double its output in two years.
But the outlook is uncertain as China's annual economic growth probably slowed for a seventh straight