Chinese companies should be looking to increase their overseas investments in the globalmining industry.
Sluggish demand in the sector has left foreign firms struggling to cope with falling commodityprices after a brief boom last year and in 2011.
A sharp decline in steel production worldwide has hit the iron ore market. In June, the World SteelAssociation reported that production had dropped for a fifth consecutive month.
Iron ore is the key ingredient in making steel-the backbone for industries ranging fromconstruction to car manufacturing. But this slowdown has produced unexpected opportunities.
"The market value of these mining companies with good quality assets is declining as prices incommodities, such as iron ore, copper and even gold, fall," Wang Jiahua, vice-chairman of theChina Mining Association, said.
"This is a good time for Chinese companies to look overseas for acquisitions or mergers."
The global mining industry has suffered a turbulent time since the 2008 financial crisis, whichtriggered a sharp drop in raw material prices. This allowed Chinese companies to expandinternationally and increase the country's supply of key resources.
By 2011, they had invested, or bought, 284 foreign firms based in countries ranging fromAustralia to Guinea, according to figures released by the China Mining Association.
"During this period, an increasing number of Chinese companies moved in to buy overseasassets at relatively low costs," Wang said.
But in 2013, the number of overseas investments started to dry up as foreign mining firms cutoperational costs to cope with the sector's changing financial landscape.
Then last year, iron ore prices plunged by 33 percent to $89 a ton after briefly rallying to $134 aton at the beginning of 2014.
The downward spiral has continued. In April, iron ore prices dipped to about $46 a metric ton, adrop of 75 percent compared to the dizzy heights of $190 in 2011. Last month, the pricerecovered slightly to $60 a metric ton.
"It will take three to five years for the global mining industry to pick up," Wang said. "During thatperiod, some foreign firms in the sector will face major challenges."
