It is reported that China's iron ore import soars to new high in three consecutive months just playing in the hand of overseas mining giants. Iron ore talk reaches an impasse apparently, but foreign miners' secret advancing plan starting from last year end has taken effect.

Rio Tinto and the other big miners have cast a wide net to enlarge sales volume and areas from the end of last year. They provide iron ore directly to domestic traders and small and medium sized mills, continuously dragging up China's iron ore import to historical high. It is expected that the global iron ore import this year may exceed that in 2008, and 80% seaborne iron ore would go to China.

An analyst from Sinosteel Corporation said "Even the total contracted quantity remains low, but big enough to push China's mills at a disadvantage position. Meanwhile, surging import also signals that China's demand is huge and current price has bottomed out, which will bolster iron miners' expectations."

An unidentified insider said "We should not blame home mills that have signed contracts but should reform our iron ore trade system."

In recent years, domestic licensed iron ore importers have been reduced constantly. The numbers once reached to 500 in 2005 but were trimmed to 118 in 2006 and decreased another 6 in 2007. At present, there are only about 70 licensed steelmakers and 30 traders left.

Currently, domestic spot iron ore import has definitely exceeded long-term goods, and demand keeps mounting. It wouldn't keep iron ore import in order but encourage licensed firms' action. They import iron ore at long term price that not for their own use but resold to enterprises without import license. Some even hoard goods and resell at high prices to medium or small sized mills for speculative profits. It is also the main reason for 60 million tonnes stock at ports.

Flying direct iron ore import for self-use will result in more dependence on foreign iron ore in China. It is roughly estimated that steelmakers axed home made purchase from 60% to 30% in the past 6 months, which means nearly 70% of China' s iron output capacity are closed. It is of course the great news to Three-Big miners who are struggling with global financial crisis. Even USD 60 per tonne they will reap extravagant profits compared with USD 24.7 per tonne of production cost, let along sputtering transactions.

(Source: Securities Times)