China's plan for iron ore giants hits snag
High costs and poor quality of iron ore may jeopardise China's bid to reduce its dependence on foreign suppliers by creating domestic giants
China's bid to slash its dependence on foreign iron ore miners by creating its own mega producers risks running aground before it starts due to high costs and poor quality of ore. Instead, overseas suppliers may end up shipping more to their top market.
For two decades, China has been trying to reduce its reliance on iron ore supplied by top producers Vale, Rio Tinto and BHP Billiton without much success because the price of the ore it produces is higher.
These global miners are boosting output to capture more of the Chinese market through massive expansion to increase their dominance. BHP lifted its annual production guidance on Wednesday to 217 million tonnes, while Rio Tinto is close to mining 300 million tonnes a year and Brazil's Vale is targeting more than 360 million tonnes.
To make its own iron ore mining more efficient, China, which buys more than two-thirds of the world's iron ore, was drafting a plan to create six to eight domestic miners by 2025, each with an annual capacity of more than 30 million tonnes, Xinhua reported.
Chinese resources require deeper digging, and grades are falling
Beijing wants Anshan Iron & Steel, a steelmaker with its own iron ore mines, and the Metallurgical Mines' Association of China to lead the plan. A draft is expected by the end of the year to be submitted to the State Council for approval.
