Iron ore imports poised for 15% growth

The million metric tons iron ore are unloaded at Qingdao port in Shandong province, July 7, 2014. [Provided to China Daily]

China's iron ore imports are set to rise to around 900 million metric tons this year, a 15 percent year-on-year growth, on the back of the country's growing steel production base and higher output capacity of overseas mining giants, experts said on Friday.

Chen Kexin, chief analyst of Beijing-based Lange Steel Information Research Center, said China's iron ore imports will increase in 2015 with an annual growth rate of 10 percent or more to about 1 billion tons.

"The main driver for the huge growth is the international mining giants' strategy of expanding iron ore production capacity to gain more market share," Chen said.

Although China's steel output growth is slowing, the existing large base has resulted in continuous ore demand this year, which has helped global firms stay profitable amid falling prices.

During the first eight months of the year, China produced 550 million tons of crude steel, up 2.6 percent year-on-year. Lange Steel predicted that the full-year output would be around 820 million tons, which will create more demand for iron ore.

In the past few years, soaring iron ore demand from China had attracted many investors into the sector and global giants threw millions of dollars to expand capacities, which led to an overcapacity in recent years.

However, based on the confidence in China's market, leading mining companies are still working on capacity expansion.

Rio Tinto Plc, the world's second-biggest iron ore producer, is planning to enlarge its iron ore production capacity from the current 290 million tons to 360 million tons by mid-2015.

Andrew Harding, chief executive of Rio Tinto's iron ore business, said his company believes that iron ore demand will continue to increase in China, because of the ongoing urbanization process.

Brazilian mining giant Vale SA plans to double its iron ore sales to China to 300 million tons by 2018 from the 2013 level.

During the second half of the year, leading mining companies will continue to expand capacities to offset price declines based on their advantage of low costs.

Available data show that international iron ore prices dropped 20 percent during the first six months of the year, while Rio Tinto's profit from iron ore rose by 10 percent during the same period.

Rio Tinto's iron ore is priced at around $40 per ton. BHP Billiton Ltd's unit iron ore cost is about $40 to $50 per ton, which is much lower than other miners.

Chen said many domestic miners with higher production costs have already been squeezed out of the market and more mining companies will have to cut output or shut production in the second half of the year when imported iron ore prices fall further.

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