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China encouraged to reduce its dependence on imported iron ore
China needs to break the “monopoly” of foreign iron ore suppliers, including some from Australia, supplying its steel mills, a Chinese mining executive says.
Speaking at the China International Steel and Raw Materials conference in Dalian, Ansteel Mining vice-president Wang Zhizhong said yesterday the Chinese government urgently needed to support the growth of local iron ore companies to offset the market power of Australia’s BHP, Rio Tinto and Fortescue Metals Group and Brazil’s Vale.
Australia is the biggest single supplier of iron ore to the Chinese steel market, making up 62 per cent of annual imports worth $US60 billion ($82bn).
Mr Wang said China, as the world’s largest producer of steel, needed to have more control over its sources of supply for security reasons. He said China needed to develop its own domestic iron ore resources and buy more iron ore resources overseas.
Chinese steel mills had an over-reliance on imported iron ores and not much confidence in the development of its domestic iron ore resources because of its lower grade ores, he said.
“For a long time, most of the domestic steel mills have not had much confidence in the development of domestic resources,” Mr Wang said. “They believe that ‘to mine is not as good as to buy’, which has led to an over-reliance on imported ores. This has led to over-reliance on imported ores.”
Mr Wang said China had more than 30 billion tonnes of iron ore reserves.
While these were of lower quality than imported iron ore, there had been “significant technical breakthroughs in recent years” that had made them more attractive.
He said the development of China’s domestic iron ore reserves was important for the security of the steel industry.
“We need to make strategic moves and establish an effective iron ore resource security system,” he said.
Mr Wang said it was also important that China looked to develop more iron ore resources overseas.
“The development of overseas high quality resources is of great importance to China in terms of international mining co-operation, breaking the monopoly of the international iron ore market and (ensuring) the stability of iron ore supplies to China.”
He said the Chinese government should look to encourage the development of a state-owned enterprise that could focus on developing overseas sources of iron ore.
“It is urgent that we should speed up the nurturing and development of large iron ore companies. At present there are no significant iron ore companies in China.”
Mr Wang said investors from Japan, including Mitsubishi, Itochu and Mitsui, and Europe, which have no iron ore resources of their own, had more than 50 per cent equity in iron ore mines around the world, including Australia and Brazil, while “China has less than 10 per cent”.
He said this meant that China’s capacity to counter pressure for higher import prices of iron ore was “weak”.
“It is a shortcoming of China’s resource security system,” he said.
“As the world’s largest steel producer, China has a very important industry for the national economy. We should be clearly aware that we should adhere to the principle of securing raw materials for the steel industry, supporting the domestic mining sector, improving the security capacity for iron ore resources and maintaining industrial and economic safety.”
