Tougher standards for Chinese ore importers

Archiv – The majority of China’s 523 iron ore importers will be frozen out of the world market by new qualification limits, according to an article in ’China Daily’. The measures are also being seen as confirmation to the scrap trade of AQSIQ’s commitment to tighter regulatory control and as a further move towards consolidation of leading Chinese industries into publicly-owned conglomerates.The majority of China’s 523 iron ore importers will be frozen out of the world market by new qualification limits, according to an article in ’China Daily’. The measures are also being seen as confirmation to the scrap trade of AQSIQ’s commitment to tighter regulatory control and as a further move towards consolidation of leading Chinese industries into publicly-owned conglomerates.
The measures, which support the Ministry of Commerce’s new automatic iron ore import licence system implemented on March 1, will not necessarily lead to a decline in imports this year, according to Luo Bingsheng, Executive Vice-Chairman of the China Iron & Steel Association. He is reported as saying: ’We are now checking the qualifications of the importers according to 10 minimum requirements, and those who fail to meet these requirements will lose their import rights.’
The association worked out the requirements in concert with the China Chamber of Commerce of Metals, Minerals and Chemical Importers and Exporters in early March. Mr Luo, who is also a member of the Chinese People’s Political Consultative Conference (CPPCC), said steel enterprises had responded positively to the move. Although declining to elaborate on the requirements, he confirmed that the aim is to allow only large enterprises to reserve the right to bargain in the world market. ’We aim to build normal trade order through standardising the market and competition,’ said Mr Luo. ’We had too many importers.’
Without effective co-ordination, the steel industry has endured ’blind’ imports, fierce competition and a surge in prices over the past few years, especially in 2004. ’If, for example, we had only around 100 importers, it would be much easier for us to implement co-ordination and strengthen self-discipline to curb blind competition,’ argued Mr Luo. A lack of co-ordination and unhealthy competition are blamed for Chinese buyers’ weak bargaining power in price negotiations with foreign suppliers, despite the fact that China is currently the world’s largest iron ore importer with volumes soaring by over 40% last year to 208 million tonnes.
On behalf of 13 Chinese steel mills, Shanghai Baosteel Group has followed Japanese steel firms in agreeing to a 71.5% price increase for iron ore this year with Australian and Brazilian suppliers. ’Through better co-ordination and self-discipline, we can speak louder in the world market,’ commented Mr Luo. ’The surging price will vigorously stimulate domestic production of iron ore this year.’
In January alone, Chinese iron ore production posted a year-on-year increase of 31% or 5.12 million tonnes. Meanwhile, domestic steel firms will focus in the near term on digesting some 40 million tonnes of iron ore piled up in China’s harbours. ’As a result, it is very likely that China’s iron ore import volumes will be below earlier expectations this year,’ ventured Mr Luo.
The tight supply situation in the global iron ore market might reverse in the coming years as the world’s three major producers plan to increase their capacity by 120 million tonnes within the next three to five years. ’We may even witness an oversupply in the market, which is not good for the suppliers,’ Mr Luo said. ’Big (price) ups are always followed by sharp downs.’
However, he admitted that the domestic steel price will remain high due to the iron ore price hike and to the estimated 20% price gap between the domestic and international market. ’Prices for some steel products have already gone up,’ observed Mr Luo. ’I think that’s normal.’