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-- Clyde Russell is a Reuters columnist. The views expressed are his own. --
By Clyde Russell
PERTH, March 11 (Reuters) - One question that skulks like an elephant in a room where the iron ore industry has gathered is who has benefited the most from bulging global supplies.
The Anglo-Australian pair of BHP Billiton and Rio Tinto are happy to tell you how they have successfully ramped up output at costs low enough to still rake in profits.
That was very much their message at this week's Global Iron Ore & Steel Forecast conference in the Western Australia capital city.
The smaller miners suffering from the collapse in Asian spot iron ore prices are only too willing to speak of their battle to survive amid what they see as the destruction of the value of an industry that is Australia's largest export earner.
The price of iron ore .IO62-CNI=SI hit its lowest on record on Tuesday, at $58 a tonne, with this year's decline of 19 percent compounding last year's slump of 47 percent.
Steel industry officials in China, the destination of two-thirds of the world's seaborne iron ore, will also tell you how their industry suffers from overcapacity, poor profits and the economy's shift to consumption-led growth.
So all this begs the question, who is the winner of the decisions by the major iron ore miners, and some aggressive juniors, to build capacity beyond even the most heroic assumptions of global steel demand?
The big three miners, Brazil's Vale, BHP Billiton and Rio Tinto, along with number four, Fortescue Metals Group , are the prime drivers behind the roughly 330 million tonnes of iron ore capacity that has come on line, or is scheduled to start in the next few years.
To put this figure in perspective, China's iron ore imports stood at 934 million tonnes last year, up 13.9 percent from the previous year, and about double what they were in 2007.
The investment decisions for the bulk of this new capacity were taken around 2011, when iron ore prices hit a record above $190 a tonne and optimism abounded that Chinese import demand would rise to around 1.5 billion tonnes sometime around the middle of next decade.
The reality has turned out somewhat differently, with the China Iron and Steel Association (CISA) believing the nation's steel output has peaked at 823 million tonnes last year.
Li Xinchuang, the association's deputy secretary general, told the conference that steel demand in China, which accounts for about half the global total, will gradually decline in coming years.
Assuming his forecast is accurate, the good news for iron ore is that he does not foresee a rapid decline from peak steel, rather a more gentle easing.
But this implies the iron ore industry's only hope of being able to sell additional output comes from displacing high-cost producers.
To some extent, the big three plus Fortescue have had some success, with a rapid fall in Chinese imports from countries besides Australia and Brazil.
Smaller producers in Australia have also been forced from the market and more could follow if prices remain depressed.
The main game for the major, low-cost miners is to force the curtailment of Chinese domestic production, and this is also happening to some extent.
Rio Tinto iron ore boss Andrew Harding told the conference 125 million tonnes of high-cost iron ore exited the market in 2014, of which 85 million tonnes were in China.
He expects a further 85 million tonnes may be at risk of being idled, but even that would not be enough to offset the wave of new supply.
Of course, Rio Tinto and BHP Billiton are more optimistic on steel output in China than CISA or Chinese consultancy MySteel, as well as being bullish on steel consumption outside China over the next 15 years.
Even if the miners are correct, the market is likely to remain in strong oversupply for several years, waiting for both demand to rise and some supply to decline as the mines reach end of life and little is done to replenish depleting reserves.
And this brings one back to the question of who are the winners?
Not investors in BHP Billiton and Rio Tinto, with the Australia-listed shares of both now a third below 2011 levels.
Not the Chinese steel mills, although their woes are largely self-inflicted as well, having built 1.2 billion tonnes of capacity, about 40 percent of which is now idled.
How about iron ore traders? They will have benefited from the rapid growth in market volumes and the increasing use of paper derivatives, such as Singapore Exchange's swaps.
But the extended period of low prices has most probably eaten away at their margins as well, making iron ore at best a marginal business.
Australian state and federal governments are also likely to be less than pleased, given their royalties are priced-based, meaning lower prices outweigh higher volumes.
Australian workers benefited in the construction phase, but with no more work in the pipeline, many will struggle for jobs.
Steel end users are also not certain beneficiaries, with Chinese property developers struggling, again largely because of the decision to over-invest.
The main beneficiaries of the iron ore glut have to be makers of steel-intensive products, such as cars and white goods, but competition in their industries may not allow them to build margins on the back of lower input costs.
Perhaps the ultimate beneficiaries are borrowers, as lower steel prices feed through into several products, keeping inflation low to non-existent in many countries, and letting central banks keep interest rates at historic lows.
Disclosure: At the time of publication Clyde Russell owned shares in BHP Billiton and Rio Tinto as an investor in a fund.
Editing by Himani Sarkar