Reuters reported that China"s iron ore imports surged to a new record in March.
Preliminary data from the ministry showed that China imported a record 51 million tonnes of iron ore in March, taking total purchases in the first quarter to 130.5 million tonnes up by 18% YoY.
The rise mirrored Chinese steelmakers" increasing reliance on imported ore though mills are still locked in annual price talks with global mining majors BHP Billiton, Rio Tinto and Vale.
Mr Henry Liu Macquarie Bank analyst said "Recovery in production and lowering spot prices of imported iron ore drove steelmakers to buy more in the first quarter. The concentrated purchases in concentrated period squeezed domestic iron ore miner’s margins, pushing some of them out of business. Then steel mills had to buy imports."
Macquarie analysts said "The bulk of the imports are supplanting domestic material which cannot compete with imports on quality or price. We believe that current production levels are over 100 million tonnes annualized off their mid 2008 peaks."
Many of China"s 150,000 mines produce low grade ores and are small scale, with costs running close to the iron ore spot prices of USD 60 per tonne to USD 65 per tonne and have been forced out of business. Cheap freight costs .BDI which has fallen 36% in just one month to a two month low this week, have also made high grade seaborne ores available at attractive costs enough to replace low-grade domestic ores.