In Commodity News 30/04/2015
China’s state-backed steel industry association has called on the central government to accelerate tax relief measures for the country’s iron ore industry, most of which it says is struggling with production as global prices of the steelmaking mineral reach their lowest levels in a decade.
“We are not on a level playing field with global miners,” China Iron and Steel Association executive vice chairman Zhu Jimin said.
“We need to lessen the burden on our iron ore mines. We need a batch of mines that can survive even if the global price of iron ore falls to $US60.”
The call comes after iron ore prices slumped in the three months to March, also putting intense pressure on higher-cost Australian miners as more efficient resource giants like BHP and Rio Tinto ramp up production.
Global iron ore prices have now recovered ground to be $US60 a tonne, although this is still down 55 per cent since the start of last year.
It’s also far lower than the $US81-$US97 it takes to produce a tonne of Chinese ore.
“It’s common for domestic iron ore mines now to be making losses, cutting production or completely halting production,” Mr Zhu said.
Foreign ore now accounts for more than 80 per cent of the ore China consumes, compared with 70 per cent two years ago, he said.
The association and the Ministry of Industry and Information Technology are also examining ways for steel mills to exit the industry in an “orderly” way, as local governments dependent on steelmakers for employment and revenue are reluctant to let loss-making mills shut.
“It’s very difficult for a steel company to get out of the industry — what happens to employment? What happens to local-government revenues?” Mr Zhu said. “We need to build a policy structure for orderly withdrawals.”
