Chinese steel mills turn to more imported iron ore

(Xinhua)
Updated: 2009-04-26 15:26

BEIJING -- A Chinese domestic steel mill, Tangshan Ganglu Iron and Steel Co., Ltd., has been using 100 percent imported iron ore in production since March -- though in January, domestic iron ore made up for about 30 percent of the total raw materials.

The company, based in Zunhua in north China's Hebei Province, is one of the domestic mills that have been using more imported iron ore.

"Imported iron ore is cheaper than domestic one and with higher quality," said a manager with the company who declined to be named.

Analysts said the global iron ore big three, Vale, Rio Tinto and BHP, have been competing for Chinese markets as the demand in parts of the world has been shrinking amid global financial crisis.

Zhu Kai, Vale's China manager, said that about 100 million tonnes of domestic iron ore at high costs might be replaced by imported iron ore which had price advantages.

China imported a record volume of iron ore in March, 52.08 million tonnes. It beat the previous record set in February when the country imported 46.74 million tonnes of iron ore.

The country imported 130 million tonnes of iron ore in the first quarter.

The three global giants "dumping"iron ore to China will suppress domestic supply and cement their control over global mineral resources, said Zhang Ye, deputy-general-manager of China National Minerals Co., Ltd.

China might have a lesser say in the ongoing benchmark iron ore price negotiations, Zhang said.

Analysts reckoned the negotiations between China's steel companies and iron ore miners could last until mid-year, which would be a record.

The benchmark price for China is significant for the overall situation of the iron ore firms, as China's demand for iron ore in 2008 was 444 million tonnes, more than half of the world's total.

Iron ore and steel companies usually agree on the year's long-term contract prices by April 1, the start of a financial year. However, steel makers and iron ore companies are deadlocked this year.

"About 90 percent of China's iron ore mines are suffering from losses," said Du Wei, an analyst with Umetal.com. "The domestic mining firms would be under great pressure if the imported iron ore prices continued to go down."