The rising import contract prices and freight rates for iron ore are encouraging China to look increasingly to domestic alternatives for the raw material. Mr Olle Ostensson of natural resources office of UN Conference on Trade and Development said “The higher freight rates and contract prices are the biggest incentive for China's domestic iron ore miners.”

Mr Ostensson while speaking at the China International Steel & Raw Materials Conference said “The most surprising thing has been the 35% rise in China's iron ore output in the first seven months. Despite China's iron ore quality being significantly lower than the world average, it will nevertheless become the world's second biggest producer.”

Mr Ostensson said China's domestic output of iron ore was far outpacing the much-publicized increases in steel production that have made it the world's largest steel maker. He said the growth in iron ore production would allow China to supply an ever-increasing portion of its mill demand and allow it to overtake Australia as the world's second biggest miner of the raw material. Of the 1.3 billion tons of iron ore mined last year, Brazil accounted for 22%, Australia 20% and China 16%.