Major miners to have less profits, market share?

Sometimes we observe the performance of mining companies at the Stock Exchange or look at their profits and think, “will miners keep obtaining those high returns?”. Some people are starting thinking about it, such as former BHP Billiton chief executive Chip Goodyear, who says returns from international mining giants will fall in the coming decade.

The executive believes that, despite mergers and acquisitions in the mining sector, entrants such as China’s state-owned companies will fragment the market and force major miners to lower their margins. “In the next decade the industry structure will fragment”, he said. “What I mean by this is that the market share held by the largest players in any individual commodity will drop. In growing markets, companies are under less cost pressure, capital is readily available and new supply enters the market”, he added, mentioning emerging groups such as Kazakhmys, ENRC and Vedanta.

Anyhow, Goodyear believes that demand will keep warm. “There remain several billion people who have an aspiration to improve their quality of life and their standard of living. This requires commodities”.