China to build overseas iron ore mines to ensure supply

Simandou deposit, Guinea. (Image courtesy of Rio Tinto.)

China aims to build one or two globally significant overseas iron ore mines by 2025 to boost the supply of the steelmaking ingredient and strengthen its pricing power, the industry ministry said on Thursday.

Equity output from stakes held by Chinese firms in overseas mines should account for more than 20% of iron ore imports by that year, according to a five-year plan for the steel sector published by the Ministry of Industry and Information Technology (MIIT).

The plan, which is open for public feedback until Jan. 31, also called for increased supply of other steelmaking mineral resources such as manganese and chrome.

China will also speed up mergers and acquisitions in the steel sector

China, the world’s biggest steel producer, currently relies on imports for around 80% of its iron ore but it is not known how much of that is from mines overseas in which it holds stakes.

It has domestic iron ore mines with a much lower grade than in top producers like Brazil and Australia, and owns a stake in the Simandou mine in Guinea.

“China will accelerate construction of large iron ore projects in West Africa and Western Australia,” the MIIT said, adding that cooperation would also be strengthened with resource-rich Russia, Kazakhstan, Mongolia, Cambodia and other neighboring countries

China will also speed up mergers and acquisitions in the steel sector and form several “world-class” steel groups, said the ministry.

The top five Chinese steelmakers are expected to account for 40% of China’s total steel output by 2025, while the top 10 will have a 60% share, up from 37% now.

New steel production capacity in China will be strictly prohibited and new steel projects in coastal areas are “in principle” not allowed, the MIIT said.

Electric arc furnaces – which mostly use scrap steel as feedstock – should account for 15-20% of crude steel output, it added.

The MIIT, which on Thursday jointly issued a statement allowing imports of high-grade steel scrap from Jan. 1, is seeking to increase the annual supply of domestic steel scrap resources to 300 million tonnes, the document said.

(By Min Zhang and Tom Daly; Editing by Jason Neely and Jan Harvey)

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