Lower Steel Demand from China Chills Mining Stocks (BHP, VALE, RIO)

The projected slowdown in China’s GDP growth to 7.5% in 2012 has dampened demand for steel. Steel prices are flattening out and the result is that investors are seeing a drop in demand for iron ore. Stocks of the world’s largest iron ore miners are getting hit, even though demand for iron ore is expected to continue growing.

This somewhat anomalous situation is hitting BHP Billiton Ltd. (NYSE: BHP), Vale SA (NYSE: VALE), and Rio Tinto plc (NYSE: RIO) today, following comments on the steel and iron ore markets from a BHP executive to Bloomberg News:

We’re still confident in the long-term demand for commodities generally, of which iron ore is one, as one-third of the global population is urbanizing and the population is getting bigger.

BHP expects iron ore demand to continue growing through 2025 and the company plans to double its current production by 2020. BHP expects steel demand from China to grow from 700 million tons today to 1-1.1 billion tons by 2025.

But that’s not helping share prices today, as the reports of the current slowdown are weighing on the big miners’ stocks. BHP is down -3.4% at $72.95 in a 52-week range of $62.54-$104.59. Vale ADS are down -3.8% at $22.88 in a 52-week range of $20.46-$34.74 and Rio is down -3.9% at $54.90 in a 52-week range of $405.0-$74.99.

Paul Ausick