SHANGHAI, Nov. 10 (SMM) -- On November 7th, the Ministry of Industry and Information Technology (MIIT) released a document entitled Iron and Steel Industry Development Plan during the 12th-Five Year Plan Period. According to the document, the following efforts should be made to strengthen iron ore supply system. First, iron and steel mills are encouraged to explore and invest iron ore, chrome ore, manganese ore and coke resources in oversea market. Second, efforts should be made to standardize iron ore market order, strengthen iron ore exploration and improve recycling rate of tailings in domestic market. Third, government should support ecological restoration of closed mines. Fourth, government should also encourage consolidation of existing mines in order to improve industry concentration.
During the 12th-Five Year Plan period, China should establish iron ore self supply system, overseas iron ore supply system and State iron ore reserve system. China should also have deep understanding of threat to domestic iron ore industry from international iron ore monopolization and financialization. China aims to realize more than 45% iron ore self-sufficient rate, and tries to keep the proportion of China's self-invested overseas iron ore in China's total imported iron ore to more than 50% in 2015.
Steelease believes that this aim is achievable, but whether or not the aim will be materialized shall depend on domestic iron ore demand. Since iron ore price hike is considerable, domestic investment for ferrous metals mining and beneficiation is accelerating. From 2008 till today, annual investment growth rate is at least above 20%, especially high in 2010 and 2011, while annual investment value is above RMB 100 billion. High investment growth rate allows new capacity to amount to 300 million mt. However, whether new capacity can contribute to output shall depend on domestic iron ore demand. Once economic condition is disappointing and once iron ore prices are significantly down, capacity at many mines with high production costs will not be released. In that case, possibility for a 45% iron ore self-sufficient rate is low in China.