With new entrants rising in the market, China's industry dominance could be less than solid.

Major mining companies have succeeded largely in their push for short-term iron ore pricing, breaking with the four-decade-old tradition of annual benchmark prices. Price control for traded iron ore has shifted to the three major mining-for-export companies after their significant consolidation of ownership:

--U.K.-Australian BHP Billiton  and Rio Tinto and Brazilian Vale together exported around 74% of the seaborne trade in 2009.

--Vale and BHP Billiton successfully pushed this year for the end of the annual pricing system in favor of quarterly price adjustments.

Rio Tinto announced April 8 that it is still negotiating--especially with China, the world's largest importer of iron ore--to set prices on a quarterly basis. Rio Tinto has had a tense relationship with Beijing after failed price negotiations and China's arrest and conviction of four Rio Tinto employees.

China 
Beijing continues to oppose the shift to a quarterly pricing system, and has called for an international trade challenge to what it regards as monopolistic practices by the big three iron ore exporters:

--China accounts for about 65% of seaborne ore imports, followed by Japan with about 10% and all others with a combined 25%.

--Iron ore is the primary ingredient in making steel, which is a critical part of building major roads and bridges, office buildings and apartment blocks as well as cars and buses.

--Last year China overtook the United States in number of vehicles sold, and China's cars sales in January 2010 were more than double those of a year earlier.

Concentration 
The world's iron ore industry has become very concentrated in the last few years. In 2009 Vale had approximately 310 million tonnes of capacity; Rio Tinto had around 220 million tonnes; BHP Billiton had approximately 140 million tonnes. Chinese buyers are seeking to increase the number of sources of their iron ore supply, both globally and domestically, in order to diminish their dependency on these "big three."

Global Supply 
The rising Chinese demand for iron ore and the country's desire to break the oligopoly of the big three suppliers are driving forces for additional capacity:

--Global iron ore mining capacity has been expanding at a 6% annual rate and is expected to continue to do so.

--In North America alone, the challengers include at least six juniors and startups. Pelletized iron ore, which accounts for about 17% of global iron ore trade, is the premium product.

Many established and new iron ore producers in India, China, the former Soviet Union, Africa, North America and even traditional producers Brazil and Australia are challenging the market position and oligopolistic power of the three major iron ore companies.

New Capacity
The supply of iron ore will continue to increase as capacity expansions are long-term in nature and financing is already in place:

--In China new iron ore mine capacity expansions totalled about 50 million tonnes in 2008, and are estimated to have been around 35 million tonnes in 2009. This year the increase may be only 25 million tonnes, with year-end iron ore mining capacity at about 490 million tonnes.

--Outside China iron ore mining capacity rose about 115 million tonnes in 2008, with the increase in 2009 estimated at about 81 million tonnes. In 2010 there may be another 107 million tonne gain, bringing the total non-Chinese iron ore mining capacity to 1,590 million tonnes.

Outlook
Despite its importance as the key global importer, China is loosing clout in the iron ore market. Vale, Rio Tinto and BHP Billiton will maintain their major influence over the world price for the foreseeable future. In the longer term, new mining entrants are likely to act as a moderating influence on pricing.

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