China seeks to safeguard iron ore supply

The average price of iron ore imported by China was up nearly 50 percent in the first half of 2010 with a decline in quality, according to a report released on the China Iron and Steel Association (CISA) Web site on July 30.

Given that the big three global iron ore suppliers have changed the iron ore trading mode and there is an ongoing trend toward converting iron ore trading into a financial product, China is studying the establishment of an iron ore supply security system, according to the CISA.

Shan Shanghua, secretary general of the association, said that along with the involvement of international financial capital, major foreign suppliers have utilized their monopolistic advantage to drastically lift iron ore prices, which has affected the normal production and operation of domestic iron and steel enterprises.

China's average iron ore CIF price, which is short for cost, insurance and freight, stood at about 112 U.S. dollars per ton in the first half of 2010, up by about 36 U.S. dollars or about 47 percent from a year earlier. The iron ore price was even as high as 140 U.S. dollars per ton in June, up by about 72 U.S. dollars per ton or 105 percent from the same period last year.

Despite the rising cost of iron imports, the quality has been constantly degraded. According to the results of inspections conducted by the General Administration of Quality Supervision, Inspection and Quarantine, the quality qualification rate for imported iron ore was only 51 percent in 2009 and the quality of iron ore imported in the first half of 2010 was even worse.

Shan said the iron-to-steel ratio in China's iron and steel industry is still above 0.96 and the raw materials for steel production will still be iron ore in the near future. Given the situation, China is studying the establishment of an iron ore supply security system.

The system will cover four aspects: improving scrap steel recycling, accelerating the development of domestic iron ore mines, increasing the proportion of imported iron ore produced from China-owned overseas mines in total iron ore imports and pursuing fair iron ore trade.

By People's Daily Online