China said on Wednesday it had found Asia's biggest iron ore deposit in its northeast region, just as Chinese steel mills enter the finale of crucial talks over pricing with global ore suppliers.
The official China News Agency cited local authorities as saying the newly discovered iron ore deposit in China's Liaoning province has estimated reserves of at least 3 billion tonnes.
A local geological official confirmed the figure and told Reuters that the mine will start production next year and could be producing up to 5 million tonnes by 2015.
China, the world's biggest iron ore importer, relies on global suppliers for almost half of its 1 billion tonnes of annual demand. It bought 444 million tonnes of ore in 2008 from abroad, but analysts said the announced discovery would probably not affect ongoing negotiations with ore suppliers for the upcoming contract year.
"This discovery is large but needs to be put into context. I think it's very short term for China to negotiate the contract prices for iron ore by jumping in with discoveries," said a Hong Kong-based trader, who asked not to be identified.
There are also uncertainties over how much of the deposit can be economically mined and what the investment costs would be, he added.
The Liaoning official said the mine will require 2.5 billion yuan ($366 million) of investment and will be 20 percent owned by Benxi Iron & Steel Group. The main investor is a Shenzhen-based company, the Liaoning official said, but declined to name it, adding the local government will hold a 20 percent stake.
The deposit lies close to the base of the operation of Benxi's local rival, Anshan Iron & Steel Group.
The official told Reuters that the deposit, located in Dataigou of Benxi city, could potentially be as big as 7.6 billion tonnes, which would make it the world's biggest iron ore mine.
Chinese steel mills are struggling to resolve protracted haggling with iron ore supplier Rio Tinto, which has offered a cut of 33.5 percent instead of the reduction of 40 to 50 percent that China seeks.
"I think the discovery will not have any impact on the current ore price talks as the production won't come to the market until 2015," said Ma Zhongpu, a Beijing-based analyst at ChinaCCM, a China market research provider.
The Chinese government said it will scale back output and punish any mills that are found to be responsible for "blindly" overproducing steel and undermining its negotiating position.
The deposit has both magnetite and hematite material and its iron content is between 25-62 percent, the China News Agency said.
The reserves at Dataigou are equivalent to the combination of all the iron ore reserves in Liaoning's Anshan and Benxi areas, the report said.
Source: The Guardian
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