COLUMN-Big iron ore miners' plan to displace everybody else losing steam: Russell

(Corrects to add apostrophe in headline)

--Clyde Russell is a Reuters columnist. The views expressed are his own.--

By Clyde Russell

LAUNCESTON, Australia, June 3 (Reuters) - How well is the plan by big iron ore miners to displace high-cost iron ore from the seaborne and Chinese domestic markets going? Maybe just OK, certainly not great.

Much has been written about how the big three global iron ore miners will use their low-cost, high-output mines to muscle competitors out of the market, thus restoring the supply-demand balance and ultimately justifying the billions of dollars they spent boosting capacity well in excess of demand.

The problem for Brazil's Vale and the Anglo-Australian pair of Rio Tinto (Xetra: 855018 - news) and BHP Billiton (NYSE: BBL - news) is that the signs are this isn't working perhaps as well as they may have hoped.

Certainly Chinese trade numbers show that Australia in particular has increased market share in iron ore imports, but the momentum may be stalling.

In the first four months of the year, Chinese imports of the steel-making ingredient from Australia were 195.845 million tonnes, or 63.7 percent of the total 307.282 million tonnes.

This is up from the 58.7 percent share of imports held by Australia for the whole of 2014, but it appears the pace of growth in market share is slowing.

The news is worse for Brazil, which has actually been surrendering market share.

In the first four months of 2014, imports from Brazil were 57.54 million tonnes, or 18.3 percent of the total.

This is down from the 18.7 percent market share held in 2014, 18.9 in 2013 and 22 percent in 2012.

While volumes have obviously increased as Chinese imports have grown from 745 million tonnes in 2012 to 932.7 million last year, it appears Vale has been struggling to keep up with its Australian competitors.

It's possible to make the argument that Rio Tinto and BHP Billiton, along with world number four producer Fortescue Metals (Hamburg: FVJ.HM - news) Group, have achieved what they said they would.

Not only has Australia increased its share of Chinese iron ore imports, volumes have grown strongly as well.

But the point is whether the success to date is petering out, and whether some of the iron ore the Australians need to displace to make way for the millions of tonnes of additional capacity still coming to the market is actually likely to leave.

While Australia and Brazil accounted for 82.5 percent of China's iron ore imports in the first four months of 2015, that still leaves almost 54 million tonnes that came from other suppliers.

GETTING HARDER TO DISPLACE TONNES?

It's these imports that the major miners will be seeking to displace in coming months, but this may prove challenging.

The third-ranked supplier, South Africa, saw only a small deterioration in its market share to 4.6 percent of imports in the first four months of 2015, from 4.8 percent in 2014.

Among minor suppliers, there were dramatic declines for Iran, Mauritania and Sierra Leone, but Ukraine and Russia both saw strong gains.

What this shows is that while Chinese steel mills have turned to Australian producers, they are still willing to buy from other countries.

In order to render imports from those countries uncompetitive, it's likely that the big three miners and Fortescue will have to be prepared for even lower prices.

And even that might not drive all the smaller suppliers to the wall, as different factors such as quality come into play.

South Africa's iron ore exports are mainly in the form of lump or higher-quality fines, and these may continue to command attention from Chinese buyers, even at a price premium.

The other problem for the major miners is that China's iron ore imports and steel output aren't growing, defying their predictions for strong growth over the next 10 years.

While the current level of modest growth may just be a blip on an overall trajectory higher, the bullish views of the miners are looking increasingly isolated as the Chinese steel industry and others say output is unlikely to gain much in coming years.

Iron ore imports are up only 0.7 percent in the first four months of 2015 compared with the same period a year earlier.

Overall, the iron ore miners are confronted with weak growth in Chinese imports, and signs of stickiness in iron ore exports from countries other than Australia and Brazil.

It is into this market that the big three miners are adding millions of additional tonnes of iron ore, and if that wasn't enough, the 56-million tonne a year Roy Hill mine controlled by Australia's richest person, Gina Rinehart, will start shipping later this year.

It's just getting harder and harder to see any bullish case for iron ore.

(Editing by Richard Pullin)