China is unhappy at being at the mercy of the Big Three iron ore producers but with Chinese steel mills having to import more and more iron ore it is the miners who hold the upper hand in the current price negotiations. This was according to Raw Materials Group senior partner Magnus Ericsson, who is also a professor of mineral economics at Lulea University of Technology in Sweden.
Mr Ericsson, who spoke at the Mining Indaba in Cape Town on Monday 1 February, said that the speed with which both Australia and Brazil weathered the global financial crisis is an indication of just how import mining activities are to those countries. But he also pointed out that imports of iron ore into China have increased despite a slight slowdown in steel production which points to a deterioration of the quality of Chinese domestic iron-ore.
Mr Ericsson said that he is sceptical about news reports of recent iron ore discoveries in China and at the present rates of depletion of existing Chinese iron-ore mines he is convinced China will not have sufficient iron ore within China itself and will become even more reliant on imports.
Mr Ericsson anticipates a reduction of steel intensity in China, as many in eastern China have attained levels of per capita steel consumption close to the consumption levels of Europe and North America. However it would take some time for the western parts of China to follow suit.
Meanwhile global economist David Hale said at the conference that in eight years time there will be more than 100 companies on the Australian stock exchange that will be 50% Chinese owned, including 20 iron-ore companies, six uranium companies and 12 copper-and-gold companies. "The major companies will continue to have a very strong domination over China," he said
Dr Hale anticipates a slower rate of economic growth in China over the next ten years, but he estimated iron ore surpassing two billion tonnes in 2014.
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