How Fortescue outsmarted BHP and Rio

A new deal could win both Fortescue and Vale a bigger share of the Chinese market – but does China want more iron ore?

Summary: The deal between Fortescue Metals Group (FMG) and Brazilian miner Vale for joint venture projects - involving the blending of iron ore from both companies to sell into China - could see them capture a larger share of the market – but this comes at a time of oversupply and any upward trend in demand can be explained by one off events, like restocking post-Chinese New Year, that do not signal a broader turnaround.

Key take out: Rio Tinto and BHP Billiton have failed to see the threat of Fortescue for what it is, and the impact that the Vale deal will have on their business models.

Key beneficiaries: General investors. Category: Commodities.

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