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China's iron ore import dependency hits 69%

Sunday, January 31, 2010 by Metals Place

Zhu Hongren, spokesperson for the Ministry of Industry and Information Technology (MIIT) disclosed during a press conference held January 27 that China imported a total of 630 million tons of iron ore in 2009, up 41.6 percent year-on-year, and the iron ore import dependency ratio has increased from 44 percent in 2002 to 69 percent.

Unfavourable messages to China have been widely spread since relevant negotiations were launched in October 2009. Several international investment banks have predicted that iron ore prices will rise by 30 percent to 50 percent in 2010, and Rio Tinto (ASX: RIO) and BHP Billiton (ASX: BHP) have threatened to turn their backs on China and reach agreements with Japan in order to put pressure on China.

Last year, the China Iron and Steel Association stated at the beginning of negotiations that Australia and Brazil should cut ore prices by 45 percent and 40 percent respectively.

The China Iron and Steel Association maintained its tough stance as the market situation is favourable to China. However, things were still going in contrast to China's wishes.

Zhu stated January 27 that handling the negotiations requires self-discipline from domestic enterprises and iron ore prices should be determined by market demand. Baosteel Group Corporation is currently the representative of domestic enterprises to negotiate with foreign companies.

Regarding the surge in dependency, industry experts hold that there is a mutual-dependence between relevant foreign countries and China which has now become the world's biggest iron and steel producing country and the world's top iron ore importing country.

Statistics show that the ore import from Rio Tinto and BHP Billiton accounts for at least 60 percent of their total output and the ore import from CVRD also accounts for 40 percent of its total output.

In addition, signs have shown that the soaring iron ore prices may go down. Ore prices will not continue to rise because iron and steel only reap meagre profits, said Zeng Jiesheng, an analyst.

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