China's iron and steel industry is likely to once again reduce the number of enterprises permitted to deal with iron ore imports to better co-ordinate the sector.

"It is necessary to further raise the threshold for importing iron ore in a bid to bring order to the iron ore trade," said a statement jointly released on Friday by the China Chamber of Commerce for Metal, Mineral and Chemical Importers and Exporters, and the China Iron and Steel Association.

It said standards relating to business resource conservation, environmental protection and production security capabilities should be strengthened.

The statement said the latest move was suggested by the industry in recent talks with iron ore dealers.

But it did not elaborate on how many firms would be eliminated from trading.

The industry voluntarily implemented a qualification mechanism and cut the number of iron ore importers to 118 last year from 523 in 2004.

Earlier reports suggested licences to deal with iron ore imports might be reduced to 99.

The industry agreed in March last year on the qualifications for local iron ore importers and application procedures.

Permits for iron ore imports are only given to steelmakers and traders with a certain trade volume.

The association and the chamber of commerce also said in the statement that China should pursue long-term contracts with suppliers in a bid to prevent price fluctuations. They added this would help reduce speculation by intermediate traders.

According to a policy relating to the steel industry, China will shut off blast furnaces with a production capacity below 200 cubic metres this year and below 300 cubic metres in 2007.

The two associations called on enterprises to strengthen self-regulation and prevent iron ore flowing to small mills.

The statement comes as Chinese businesses are in talks over iron ore prices with major suppliers.

There have been reports suggesting Chinese iron ore buyers' representative, Shanghai Baosteel Group, has decided to accept a 19 per cent price increase in long-term iron ore contracts this year, in line with the actions of mills from Europe, South Korea and Japan.

But officials from the steel and iron association denied the rumours and said Baosteel was still in negotiations with three major suppliers, Australia's BHP Billiton Ltd, Rio Tinto Group, and Brazil's Companhia Vale do Rio Doce.

Chinese mills and iron ore traders accepted a 71.5 per cent rise in iron ore prices last year, a price set by Japan's Nippon Steel.

Figures from customs show that last year China imported 275 million tons of iron ore, up 32.3 per cent year-on-year and accounting for 43 per cent of the world's total ore shipments.

(China Daily 06/10/2006 page5)

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