While China's steel mills are enjoying lower iron ore prices, the downside for China is that high-cost domestic miners are struggling

While China's steel mills are enjoying lower iron ore prices, the downside for China is that high-cost domestic miners are struggling. This year's sharp drop in iron ore prices to below $90 a tonne overnight could force China to close up to 80 million tonnes of domestic mine production, more than a fifth of its total annual output, according to consultancy Wood Mackenzie. China's domestic iron ore producers typically struggle when prices fall below $100 a tonne. China's domestic industry is highly fragmented, with producers in coastal areas believed to be facing some of the highest costs in the country - well above the price of imported ore. BHP, RIO and Vale are insulated to a significant degree as they are the world's lowest-cost producers.