china s iron ore imports to rise 11p next year

China's Iron Ore Imports to Rise 11% Next Year

By Interfax-China



SHANGHAI (Interfax-China) -- China will import 415 million tonnes of iron ore next year, up 11% or 40 million tonnes from this year, a senior China Iron and Steel Association (CISA) official said at the 2008 China Iron and Steel Industry Development and Investment Summit held in Beijing today.

"China's increasing iron and steel output is pushing up the country's iron ore demand year-by-year. It is estimated that China will import 375 million tonnes iron ore this year, up 14.9% from last year," Luo Binsheng, vice chairman of the China Iron and Steel Association, said.




China imported 349.03 million tonnes iron ore in the first 11 months this year, up 17.3% year-on-year from last year.

Meanwhile, China's primary iron ore production is set to increase 10% from 800 million tonnes this year to 880 million tonnes in 2008 on the back of soaring domestic demand and growing prices, Luo said.

"We forecast that the three big mining companies (Vale, BHP Billiton and Rio Tinto) will increase iron ore supply by 50 million tonnes in 2008, with Vale [NYSE:RIO] increasing supply by 25 million tonnes, BHP [NYSE:BHP; LSE:BLT; ASX:BHP] by 10 million tonnes, and Rio [NYSE:RTP; LSE:RIO; ASX:RIO], 15 million tonnes," he said.

The three mining companies produced a total of 547.8 million tonnes iron ore in 2006, making up 71.62% of the total global seaborne iron ore trade volume that year.

"When analyzing next year's global seaborne iron ore supply and demand, we must be very aware that the three miners hold a monopoly position in the market, and they have the capability to exert remarkable influence on iron ore supply and demand," Luo said in the meeting.

Luo also said that the recent irrational surge in iron ore freight rates not only damages steel mills' interests, but also has a negative impact on mining companies.

Driven by surging freight rates, China's average iron ore CIF price (both long-term contracted and spot market) shot to $112.78 per tonne in November, up 63.33% from January this year.

Rising iron ore prices caused Chinese pig iron producers to start shutting down or cutting production in October this year. Luo predicts that China will produce approximately 465 million tonnes of pig iron this year, inching up 12.4% from last year.

In comparison, China's pig iron production soared 215.73% from 2000 to 2006, which in turn led to a 68% increase in iron ore consumption over the period.

Skyrocketing spot iron ore prices, as well as strong iron ore demand from China this year, suggests that miners will raise the benchmark iron ore price in long-term contracts that start on 1 April 2008, and miners are already calling for next year's iron ore price to more accurately reflect the market.

Shanghai Baosteel recently concluded preliminary negotiations with the above three mining companies for the 2008 benchmark long-term contracted iron ore price, a source close to the CISA, who wished to remain anonymous, told Interfax today.

The two sides will likely kick off a new round of talks at the end of this month, the source said.