The China Securities Journal has cited Mr Zou Jian, chairman of the Metallurgical Mines Association of China, as saying that ore miners both at home and abroad are competing for China's market as the sweeping financial storm crimped ore demand sharply in Europe, Japan and Korea.
Mr Zou said China's investment in ore mining sector has surged since last year end despite the overall global supply overhang and hit CNY 3.2 billion in January and February up by 101.8%YoY from a year ago. Daily production in February reaches 2.08 million tonnes up by 13.23%.
The newspaper learned from MMAC that 7 large scale iron projects with annual capacity of 15 to 22 million tonnes each and 28 medium scale mines with capacity of 2 million to 8 million tonnes each are under construction at present in China with combined capacity hitting 228 million tonnes. Meanwhile, an official from the metallurgical association said that China also speeds up investment in mining sector in Liberia, Guinea and Senegal etc.
Mr Zou predicted that China's iron ore output would reach 880 million tonnes this year. However, domestic steel production would drop over 8% which would reduce its finished ore requirements by 60 million tonnes. As a result, China mills merely need to import 310 million tonnes of the metal to keep their production running, down 100 million tonnes from the previous year.
Mr Zou said Brazilian ore miners led by Vale have intensified their products sales in China, with exports hitting 40 million tonnes in Q1 alone compared with 100 million tonnes for whole last year. He said that the huge sales volume was achieved at the expense of 50% spot ore price cuts. And China has become the epicentre of the 2009 iron ore market since demand in Europe, Japan and Korea has fallen sharply.
A recent survey showed that the Big Three sold 177 million tonnes of iron ore in total in the first three months; of which, 140 million tonnes came to China. And Brazilian exports to Europe fell 69% in the period.
Global iron ore market would risk running a supply overhang of over 200mln tons this year. And the flooding in low priced spot ore imports also squeezed domestic iron ore miners' margins, pushing some of them out of business. Therefore, Mr Zou suggests domestic ore miners and steel mills to slow down their capacity expansion.
Mr Zou said suppliers both at home and abroad were obliged to ensure their supply for customers to retain their market shares, therefore, price falls for the product would exceed expectation.
Source: Steel Guru
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