China seeks more influence in setting iron ore prices

Cranes unload iron ore from a container ship at the Rizhao Port in Rizhao city, east Chinas Shandong province, Jan 20, 2014. [Photo/icpress.cn]

China is making headway on a decade-long program to create giant mining groups so it can play a bigger role in negotiating iron ore prices with more established rivals in the world.

The country plans to establish a large mining conglomerate focusing on iron ore extraction and smelting operations led by Liaoning-based Ansteel Group, a large State-owned iron and steel manufacturer, Beijing-based China

Steel sector still facing profitability problems

Metallurgical Mining Enterprise Association said in a statement on Thursday.

"Ansteel Group will acquire a number of mining enterprises to complete the integration work over the coming years and eventually possess an annual iron ore production capacity of 200 million metric tons in 2025," said Shao Anlin, deputy general manager of Ansteel Group.

In the meantime, up to eight large mining groups will also be integrated and established throughout China. Each individual group's production capacity of iron ore will exceed 30 million metric tons a year after a decade.

China is the world's fourth-largest iron ore producer with more than 70 billion metric tons of resources. But the nation's dependence on foreign iron ore rose to 70 percent last year. The country's domestic steel industry has spent more than 2 trillion yuan ($321 billion) on paying high prices for iron ore from the global market over the past 10 years.

To optimize the resources of domestic companies, the Ministry of Industry and Information Technology is working with related government departments and industry associations to draft a plan to restructure China's iron ore sector between 2016 and 2025. This document will be completed and submitted to the State Council by the end of this year.

Even though China produced 779 million metric tons of crude steel and 1.07 billion metric tons of steel products, more than any other nation in 2013, its steel sector is weak because of the low quality of raw materials provided by domestic miners compared with the same products shipped from Australia or Brazil. Their prices are twice as high as Chinese iron ore.