The dependence of iron ore on foreign trade dropped to 75%
Since the beginning of this year, the price of imported iron ore in my country has been at a high level for a long time. The price of imported iron ore recently fluctuated around US$90 per ton, a decline of more than 60% compared with the highest point of US$233 in May this year. Li Xinchuang, Secretary of the Party Committee and Chief Engineer of the Metallurgical Industry Planning and Research Institute, revealed: “This year, in terms of the domestic iron ore supply structure, there is a very good trend. From January to September, our external dependence has dropped to 75%. Although this 5 percentage point is not large, it should be a good trend. This year, a very important one is that we have moved from simple control of production capacity in the past to dual control of production capacity and output. The price of ore has dropped significantly.”
Crazy iron ore encountered “Waterloo” one after another. The price of imported iron ore (62% grade) has fallen from a record high of over US$230 per ton in May this year to around US$90 per ton today. Since 2019, the price of iron ore has experienced a crazy and sharp rise. From the end of last year to August this year, the price of iron ore has basically continued to be at a high level of more than 150 US dollars per ton.
The price is determined by the relationship between supply and demand. China’s steel industry, which imports more than 70% of the world’s iron ore, is undoubtedly one of the important factors affecting the price trend of iron ore.
First, the steel industry has reduced its volume.
Since this year, China has implemented a policy of dual control over production capacity and output in the steel industry.
Luo Tiejun, vice chairman of the China Iron and Steel Association, said at the forum that China’s crude steel output in the first half of the year increased by about 60 million tons compared with the same period last year, but in the second half of the year, the reduction in production increased month by month. In September, the national crude steel output fell 21% year-on-year. In the first nine months of this year, the increase in crude steel production decreased from 60 million tons to 16 million tons. In October, this trend is expected to continue.
The small decline in domestic demand is also an important reason for the decline in steel production. In recent months, the prosperity level of China’s manufacturing industry has fallen, and the steel market demand has declined. Li Xinchuang, Secretary of the Party Committee and Chief Engineer of the Metallurgical Industry Planning and Research Institute, said that China’s steel production has entered the peak platform area and will fluctuate around 1 billion tons.
The demand for steel has fallen, and the demand for iron ore has naturally weakened. Luo Tiejun said that the control of steel production has played a positive role in stabilizing steel prices and restraining the price of imported iron ore from rising too fast.
Second, the supply of iron ore no longer “increases outside and decreases inside.”
Since 2015, China’s iron ore dependence on foreign countries has been as high as 80%, and imported iron ore mainly comes from four companies in Australia and Brazil.
In the past few years, the volatile iron ore prices have caused great damage to domestic mines. Jiang Shengcai, secretary-general of the China Metallurgical and Mining Enterprises Association, said that domestic enterprises have suffered setbacks in production, investment has declined, and the industry has shrunk. After comparing the arrival cost of domestic and imported mines, he pointed out that, on the whole, as long as the average CIF price of imported mines is not less than 60 US dollars per ton, domestic mines can operate normally. He reminded that in the face of ore price fluctuations, domestic mines must do their own thing, be prepared for danger in times of peace, and strengthen their ability to prevent risks.
Li Xinchuang pointed out that from January to September this year, China’s dependence on iron ore fell to less than 80% at 75.7%. The trend of “increase from outside and decrease from inside” of iron ore resources is gradually reversed.
Ju Jianhua pointed out that in the future, we will increase the exploration and development of iron ore resources, focusing on accelerating the construction of national iron ore resource bases, as well as the exploration and development of nationally planned mining areas, and building a supply pattern with large and medium-sized mineral deposits as the mainstay. During the “14th Five-Year Plan” period, it is hoped that the annual supply of finished ore (at 62% grade) will stabilize at around 300 million tons.