Posted on 03 Mar 2022
China is actioning a medium-range plan to raise domestic iron ore supply, steel scrap consumption and equity output of iron ore in overseas mines, with the aim of "fundamentally" solving issues relating to the shortage of steelmaking raw materials within the coming 10-15 years, according to a March 1 post by state-backed China Metallurgical News (CMN).
The driving force behind the strategy is a plan proposed by China Iron and Steel Association (CISA), according to CMN. Luo Tiejun, vice-chairman of the China Iron and Steel Association, describes it as CISA's "cornerstone plan" and pointed out that the proposal had already been submitted to various state planners back in January including the National Development and Reform Commission (NDRC), the Ministry of Industry and Information Technology, the Ministry of Natural Recourses and the Ministry of Ecology and Environment.
According to Luo, within the coming three years to 2025, the plan aims to boost domestic iron ore output to 370 million tonnes/year, steel scrap consumption to 300 million t/y, and output of iron ore in overseas mines to 220 million t/y. These would be higher by 100 million t/y, 70 million t/y and 100 million t/y respectively from the 2020 level, he said.
For domestic iron ore development, Luo said the plan is not only about resources but also involves competitiveness, with the key being to relax approval procedures and obtain policy support. "... Some domestic iron ore miners' ore concentrate costs are competitive and are under $60/tonne," he added.
"Iron ore itself is not a rare, high-value product," Luo remarked. "Against the backdrop currently of tight iron ore supply, we are unable to build any iron ore stockpile. Instead, we need to strengthen the supply capacity."
During last year China, the world's top steel producer, imported 1.12 billion tonnes of iron ore whose Fe units contributing to 61% of the country's total crude steel output of 1.04 billion tonnes, CISA's statistics show. Also last year, domestic iron ore concentrates output reached around 285 million tonnes - contributing 16% in crude steel equivalent - while the volume of ferrous scrap consumed reached 230 million tonnes, supplying 20% of crude steel output.
Regarding steel scrap, the plan envisages lifting the consumption volume to 350 million tonnes by 2030 and 400 million tonnes by 2035, CMN quotes Luo as saying.
CISA suggests the plan should be implemented by steel giants such as Baowu Steel Group, Ansteel Iron & Steel Group, Shougang Group, as well as international metals groups such as China Minmetals, Luo also noted.
CISA's "cornerstone plan" is being publicized by Luo in the context of the central government's renewed determination recently to strictly crack down on iron ore speculation that deviates from supply and demand fundamentals.
Over the past several weeks, related measures had already implemented by government bodies such as NDRC, the State Administration for Market Regulation (SAMR) and China Securities Regulatory Commission (CSRC) in response to "unusual" fluctuations in iron ore prices, as reported.
Only on Monday, NDRC stated that it and SAMR had recently visited the Dalian Commodity Exchange (DCE) and conducted a joint investigation looking for signs of "unusual" trading in the spot and futures markets. In a post on its official Wechat platform the same day, NDRC had said that all "related parties" had pledged to strengthen daily supervision of spot and futures markets for iron ore to stabilize prices.
Similar comments in recent weeks saw the Mysteel SEADEX 62% Australian Fines index, for example, drop markedly amid the frequent warnings from Beijing, tumbling from as high as $153.55/dmt CFR and including 13% VAT on February 10, the highest since August 30 last year. By February 17, SEADEX had eased to as low as $130.05/dmt, before gradually recovering to $143.9/dmt as of March 1.
Source:Mysteel Global
