China''s demand for imported iron ore calms down, and iron ore imports in 2010 is expected to drop for the first time in recent 10 years. However, the cost for imported iron ore grow up unreasonably.
The country imported 69 million tonnes of iron ore in 2000, compared to 627 million tonnes in 2009. In order to fight against three miners'' monopoly, Chinese steelmakers take the reduction in imports as the major target.
"China imported 503 million tonnes of iron ore in the first ten months of 2010, down 8 percent year on year; total shipments in whole year 2010 will be around 600 million tonnes, slightly lower than 2009 figure," said an industry analyst. Another one even added that China''s iron ore imports in 2010 will witness the first drop within 10 years.
The imports in the first 11 months diminished 6 million tonnes year on year, while the cost increased US$ 25.7 billion. The November import price soared 50.45 percent year on year, in other word, China steel industry paid additional CNY 170 billion in purchasing imported iron ore, higher than the industry''s profit.
Attracted by soaring iron ore price, Chinese mines join the wave to start up. China-produced iron ore can work as the substitute of imported products, but hardly shake three miners'' position.
Now the miners'' bid is drawn great attention. Under the bid, steel mills or iron ore traders try to give a higher offer so as to finalize the contracts. "China steel industry should team up to reject the bid, and government should work out the countermeasures to hit the phenomenon," said one industry expert.
The crazy iron ore cost is squeezing China steel industry''s profit. "Chinese crude steel production peak out at 630 million tonnes, while the margin ratio is the lowest among the several industries," said Mr.Luo Tiejun, from Raw Material Sector of Ministry of Industry & Information Technology of P.R.C. He disclosed that the average profit rate of the industries was 6 percent, higher than 3.5 percent of steel industry.
Luo Tiejun made a projection that China''s crude steel production is estimated to hit 660-670 million tonnes in 2011. Commodities prices will continue quickly recovering, and coal, iron ore and steel will be in the list. He highlighted that steel price in China after Spring Festival (Feb.2-9) will rise further on the back of ample capital and rising demand.
Source: Steelhome