China seeking cheaper iron ore

The economic powerhouse has reported that iron ore imports from countries other than Australia, Brazil, India and South Africa had increased by up to 4 per cent in the first half of this year, compared with the same period last year.

The China Iron & Steel Association has widely flagged that it has an ambitious plan to source 50 per cent of the steelmaking ingredient from Chinese-invested overseas resources, up from 10 per cent now, in the next five to 10 years.

MINING.com reported August 30th that iron ore miners are calling the shots as Chinese steelmakers’ profits melt away:

China’s 27 largest steel companies saw a 15.7% decrease in the first-half profits from a year earlier for a combined profit of $1.6 billion, according to the Shanghai-based researcher Wind Info, as soaring iron ore costs squeezed margins.

The woes of China’s steelmakers, which have been switching to cheaper low grade ore to cut costs as prices top $180/tonne, are in stark contrast to soaring profits at Rio Tinto, BHP Billiton and Vale — which control two-thirds of seaborne iron ore trade and control price talks.

BHP”s West Australia iron ore business accounted for over half the mining giant’s record $22-billion profit announced last month; at Rio Tinto, iron ore contributed US$5 billion to earnings.

Also in August, Reuters reported that China  aims to develop and control resources, especially in west Africa, to gain a foothold on supply and tackle the hegemony of the top three iron ore suppliers.

“Chinese firms have signed a number of iron ore deals in Africa, which at their peak could contribute nearly 250 million tonnes of iron ore when they come on stream in the medium to long term.”

Examples include Rio Tinto and Chinalco’s 2-billion-tonne Simandou JV project in Guinea; Sichuan Hanlong’s bid for the outstanding shares of Sundance Resources, which is trying to develop the Mbalam project in Congo/ Cameroon; and a plan by Bellzone Mining Plc and China International Fund (CIF) to mine the Kalia iron ore resource, also in Guinea, estimated at around 6 billion tonnes.