China collecting new sources overseas to provide iron ore

Updated: 2011-09-02 10:03

By Zhang Qi (China Daily)

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China collecting new sources overseas to provide iron ore

A worker unloads imported iron ore powder in Qingdao port, Shandong province. China is diversifying the countries it imports iron ore from.[Photo / China Daily]

JINAN - China, the world's largest steelmaker and iron ore consumer, is further diversifying its overseas ore supplies by significantly increasing imports from non-traditional countries, an industry official said on Thursday.

Iron ore imports from countries other than Australia, Brazil, India and South Africa reached 64. 63 million tons in the first half of this year, accounting for 19.3 percent of imports and up nearly 4 percent from last year, Xu Xu, chairman of the China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters, said at a conference held by the consulting firm Umetals in Jinan, Shandong province.

The larger proportion of ore imported from other countries signals that the traditional position of Australian and Brazilian miners is being challenged, Xu said, as China diversifies its overseas iron ore supplies. The country is exploring emerging regions such as Peru, Chile and Canada, he added, and should actively develop strategic relationships with iron ore exporters including Russia, Vietnam and Kazakhstan.

He also said that the proportion of Indian ore imports tumbled by 14.9 percent in the first half of this year - the largest proportion fall in 13 years - due to higher taxes and China's surging domestic demand.

"We've seen more other countries offering iron ore supplies to us. For instance, Honduras is listed in our clients this year, after we diversified ore imports into other countries including Mexico, Venezuela, the Philippines and Iran," said Shen Tong, an iron ore trader from Zhejiang Materials Group Co Ltd, which used to import the steelmaking ingredient from Australia, Brazil and India.

Iron ore import prices for August delivery surged to the highest level since May 6, according to data from The Steel Index (TSI) released on Wednesday. The iron ore price for 62 percent ore fines ended the month at $179.9 a ton in Tianjin port.

Chinese steelmakers have seen their profits squeezed and are under heavy pressure because of costly ore prices as the world's three biggest miners - Vale SA, BHP Billiton Ltd, and Rio Tinto Group - control two-thirds of the world's iron ore exports and have a say in global ore prices.

The average price of iron ore imports surged 37.8 percent to $162.7 a ton in January to July, compared with the same period last year, resulting in 137 billion yuan added cost for the Chinese steel industry, Luo Bingsheng, the deputy Party secretary of the China Iron and Steel Association, said at the conference.

The profit margin of 77 large and medium Chinese steelmakers reached 3.08 percent in the first seven months of this year, down 0.1 percent from a year earlier, Luo said, adding the industry is in a high-cost, low-profit situation compared with the average industrial profit margin of 5 percent.

China's domestic iron ore production rose 22 percent to 691.9 million tons in the first seven months compared with a year earlier, Luo said

Luo also said global miners have overstated China's demand for imported ore because the country's domestic ore production has greatly increased.

Luiz Meriz, Vale's China president, said the company's iron ore exports to China will remain near last year's levels of 130 million tons.

He said China's steel output will rebound in the fourth quarter after slowing in the third and peaking in the second.