China, the world's largest steelmaker and iron ore consumer, has set a target of dramatically increasing ore imports from Chinese-invested resources in the steel industry's 12th Five-Year Plan (2011-2015), an industry official said.
Iron ore imports from Australia, Brazil and India accounted for 62.3% in 2010
Li Xinchuang, deputy secretary-general of China Iron & Steel Association, told China Daily that the country will only be able to break the grip of the three major global miners, Brazil’s Vale SA, UK-Australian Rio Tinto, and BHP Billiton, if it gets half of its overseas ore requirements from Chinese-invested sources.
China currently owns less than 10% of imported iron ore. We should seek 50% of ore from Chinese-invested overseas resources in the next five to 10 years, he said.
Li's remarks underscored the ambition of Chinese companies to secure steady supplies of ore globally.
Luo Bingsheng, deputy Party secretary of the association, said earlier that China has overseas mining rights capable of producing 150 million tons of ore annually, but most of the mines have yet to start production.
He accused the major global mining companies of taking advantage of supply falling short of demand to set prices at unreasonably high levels, squeezing profits from Chinese steel mills.
Last year, about 60 million tons of imported iron ore came from mines that had Chinese investment, the association said. China has been enthusiastically seeking ore resources overseas in recent years to reduce its reliance on the big global miners.
The country's biggest steelmakers, including Baosteel, Wuhan Iron & Steel Group and Anshan Iron& Steel Group, have acquired or invested in overseas mines.
Wuhan Steel has set a goal of being self-sufficient in ore supplies by 2015. Sichuan Hanlong made a recent bid for an iron ore project with identified reserves of 2.8 billion tons in West Africa.
Hanlong, a private conglomerate, last week offered 1.3 billion dollars in cash to Australia-listed Sundance Resources Ltd to gain control of its ore project in West Africa. The project is expected to start production in 2014, with annual production of 50 million tons, according to a company statement.
Liu Han, chairman of Hanlong, told China Daily that West Africa is emerging as a key region, as investment in Australia and Brazil faces a number of challenges.
Australia and Brazil both have great resources, but they don't provide many opportunities for Chinese investors due to rising cost pressures and policy barriers. Furthermore, most of the resources and the attached infrastructure are controlled by the largest mine companies, he said.
Despite the fact that it will require a huge amount of investment to build railways and ports in Africa, China needs to diversify its ore supplies to break the monopoly of the global Big Three, Zhang Lin, an analyst with Beijing-based Lange Steel Research Information Centre, said.
China imported 334 million tons of iron ore in the first six months of this year, up 8% over the year. The imports cost 53.78 billion, up 54% over the year.
According to data from the association, the average price of steel products rose 14.8% from January to May compared with a year ago, while the price for the raw material - imported ore - surged 47.8% over the same period.
The average profit ratio of the domestic steel industry from January to May was just 2.91%, far behind the national industrial average rate of 6%.
The market rate for Australian ore was steady at 179-181 dollars a ton with freight on Friday, Chinese consultancy Umetal said, up 10 dollars/ton from the May average price. A recent report released by consultants Wood Mackenzie said ore prices will likely remain above 150 dollars a ton until at least 2015.
Beijing has plans to build 36 million units of cheaper housing by 2020. Li also said China's steel production could hit a new record of 700 million tons as construction starts on 10 million social units.