Trade Resources Industry Views Chinese Iron Ore Miners Aims to Satisfy 50% of The Country's Annual Iron Ore Consumption

Chinese Iron Ore Miners Aims to Satisfy 50% of The Country's Annual Iron Ore Consumption

An industry group representing Chinese iron ore miners aims to satisfy 50% of the country's annual iron ore consumption with domestic supply by 2025, up from the current 30%, via consolidation and expansion of mining companies, a senior official with the Metallurgical Mines' Association of China said this week.

Increasing the ratio of domestic iron ore supply would make Chinese steel mills less reliant on imports and less vulnerable to global prices, allowing them to better control production costs during a challenging period in the Chinese steel industry, market sources said.

To achieve the 50% target, the association plans to lead a detailed study of domestic iron ore resources and miners and draft guidelines for China's domestic iron ore industry development over 2016-25.

MMAC announced the project Tuesday at a meeting in Beijing of 200 representatives from related Chinese authorities, major domestic mining companies and steel mills.

The guidelines are expected by the end of this year and will represent the Chinese mining industry's first detailed road map for future growth, market sources said.

"The association plans to divide China into 10 regions in accordance with iron ore deposits to facilitate the thorough investigation of the industry and producers, and it has entrusted a number of big miners including us to help with the research, which is expected to wrap up by year-end," said an official from Angang Mining who attended the Beijing meeting.

Angang Mining, a wholly owned subsidiary of Anshan Iron & Steel Group in northeastern China's Liaoning province, is China's top iron ore miner with about 60 million mt/year of iron ore mining capacity and more than 8.8 billion mt of iron ore resources in Liaoning.

The association hopes to suggest mergers and acquisitions among domestic mining companies to create six to eight giants with mining capacities of at least 30 million mt/year, said Yang Jiasheng, the senior MMAC official. He said the consolidation would lower production costs and allow the companies to better compete against overseas iron ore suppliers.

China's iron ore mining industry is dispersed, with at least 4,000 mostly small and privately owned mining companies. Fewer than 10 companies have capacities of at least 10 million mt/year and account for 15% of the country's total raw iron ore output, according to MMAC.

Chinese steel mills have suffered in recent years from a heavy reliance on imports and little price leverage, sources said. The weakness has been exacerbated since 2011 when margins narrowed amid fierce competition in the domestic steel market via price cuts because of steel overcapacity.

China's reliance on imported iron ore has grown to 70% as of 2013, from about 65% a decade earlier, despite domestic crude iron ore output rising sharply to 1.45 billion mt last year, from 260 million mt in 2003.

The country has proven iron ore deposits of 78.5 billion mt, MMAC said.

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China Aims to Meet Half of Iron Ore Demand with Domestic Supply by 2025
Topics: Chemicals