The ongoing downtrend of import iron ore prices exerts pressure on Chinese ore producers, given their high production costs. In 2014, many Chinese ore producers with annual production capacities of 300,000 mt had to halt production and yield their market shares to bigger overseas producers such as Brazil-based Vale and Australian's BHP Billiton. This ongoing situation has made China, which is the world's biggest iron ore importer, more dependent on imported iron ore. In 2014, China's iron ore imports increased by 13.8 percent year on year to 933 million mt, reflecting China's greater dependence on iron ore imports when prices move on a downtrend.
Meanwhile, despite the continuation of the downtrend in iron ore prices and slower economic growth in China, Australian iron ore producers BHP Billiton and Rio Tinto, two of the four biggest producers in the world, have decided to expand their production in the Pilbara region. Even though this decision is considered to be suicide by some market players amid the negative economic outlook and falling prices, the producers in question believe that their investments will produce results since they are currently working on decreasing their production costs. There is no doubt that increased iron ore output from these two iron ore producers will exacerbate the oversupply problem in the global iron ore market and increase the downward pressure on iron ore prices in the coming period.