Foreign iron investment urged

Commission encourages Chinese steelmakers to boost global footprint

Chinese steelmakers that have lost money because of volatile global iron ore prices should invest more in foreign mineral resources to gain greater pricing power, the National Development and Reform Commission said on Monday.

The agency said on its website that the nation's dependence on iron ore imports won't change in the long term, because there still will be rising demand for iron ore in China, the world's biggest buyer of the commodity.

It also said global miners' dominance of iron ore resources is likely to persist.

The NDRC said Chinese companies should forge a new model of cooperation between upstream and downstream industries, establishing mines and mills with foreign partners.

It also suggested adopting a more market-oriented approach in order to raise investment funds from rail and port construction companies, and even private enterprises, to support China's development and exploration of overseas mineral resources.

This money could also be used to build steel mills and other heavy industrial projects abroad to cut consumption of domestic iron ore.

China, which produces about half of the world's steel, has been trying to reduce its reliance on iron ore imports from the three top miners in Australia and Brazil - BHP Billiton, Vale and Rio Tinto, which together control three-quarters of the global seaborne trade in iron ore.

These three have held the upper hand in annual negotiations over pricing.

Last year, China's imports of iron ore rose 10.2 percent to 819 million metric tons. The value of imports was up 10.4 percent to $105.7 billion. Shipments from Australia and Brazil accounted for almost 70 percent of the total.

Analysts said volatile iron ore prices have exposed steel producers to risks.

Liu Xiaoliang, secretary-general of the China Metallurgical Mining Enterprise Association, forecast China's imports of iron ore will exceed 850 million metric tons this year.

The Australian Bureau of Agricultural and Resource Economics has forecast that China's iron ore imports will rise to 1 billion metric tons by 2018, as high-quality ore from Brazil, South Africa and Australia edges out low-quality products.

Liu said that although many Chinese miners have gone abroad for resources, few have managed to meet expectations, and only a few iron ore projects have even started production.

Aluminum Corp of China Ltd, known as Chalco, led a Chinese consortium that took a stake of about 45 percent in the Simandou iron ore deposit in Guinea in 2010. Although it is one of the biggest untapped iron ore deposits in the world, the project has yet to ship any ore.