For example, the trio kept investing in expansion projects despite falling iron ore prices -- something smaller and weaker players simply can't do. But something has recently changed that is signaling an industry turning point may be near.
Spending into the downturn
Iron ore prices have plummeted roughly 66% since peaking in early 2011. That's left once wildly profitable miners bleeding red ink. For example, Cliffs Natural Resources (NYSE:CLF) has posted red ink in each of the last five quarters as it struggles to adjust to a fast-changing market.
Vale has lost money in each of the last three quarters. And while BHP and Rio Tinto have remained largely profitable, both have watched their top and bottom lines fall from the peak years.
The main culprit, of course, is the steep decline in revenues brought about by falling iron ore prices, which make up a huge portion of each company's business. That's doubly true because these giants have actually been increasing production since the price peak in 2011.
Rio, for example, produced around 244 million tonnes of iron ore in 2011, and 295 million tonnes last year. BHP's production advanced from 134 million tonnes in its fiscal year ended June 2011 to 204 million tonnes at the end of fiscal 2014.
There are various reasons for these companies sticking to the production growth track. For starters, iron demand has continued to grow, and is expected to keep growing in the future. So the problem today is an issue of too much supply, not falling demand. Eventually, demand should catch up.
Second, building out a mine takes years to complete. So construction on the mines that are producing the oversupply today was started way back when iron prices were higher.
Third, increased production can at least partially offset the pain of falling prices. And perhaps most important, the giant players, usually with the lowest costs, can afford to keep spending when others have to stop.
Something's different today
But giant miners like Vale, BHP, and Rio are sounding a different note today. For example, Vale is still spending on expansion projects, but the new production will afford it the ability to trim production from higher cost mines.
According to CEO Murilo Ferreira, the current expansion efforts will let Vale "substitute some low margin ores with some higher margin ores." In other words, production won't grow as much, and Vale will make more per tonne.
BHP, meanwhile, has decided to defer a key project. According to the company, "While this will lead to a slower path to system capacity of 290 Mtpa, it will come at a lower capital cost." So BHP is also pulling back on the accelerator.
And Rio slipped this little gem into its first-quarter news release, "As part of the ongoing efficiency programme inventory draw-down will be used throughout the year to maximise cash flows." Another giant that seems to want to slow things down.
Supply and demand always balance out
With these giants all seemingly looking to curtail their own impact on global supply, this could be the tipping point -- an inflexion that allows demand to catch up with supply, and prices to start rising again. This, in turn, would push each of these companies' earnings higher. That's exactly the way this cyclical industry has always worked.
The big question has been, when will supply growth ebb enough for that to happen? Recent comments suggest that time might be now.
If you're a conservative investor, you'll probably want to stick with companies like BHP and Rio, which have managed to, for the most part, stay profitable in the face of adversity. For more aggressive investors, Vale, which is mired in red ink, might be of interest.