The Ministry of Commerce (MOFCOM) has forecast that
the price of iron ore can be expected to follow a downward trend in
2006 after this year's drastic rise.
Quoted by the Economic Daily on
December 6, an unnamed official from the ministry's Foreign Trade
Department said tight supply and demand in the global iron ore
market would come to an end next year, and with ample supplies
prices will fall accordingly.
In the next few years, the official said the
world's major suppliers would increase investment in exploiting
iron ore by over US$5 billion.
Zou Jian, chairman of the Metallurgical Mines
Association of China, made a bolder estimate of up to US$10
billion, Xinhua News Agency reported on December 6.
He said large suppliers in Brazil, Australia, the
UK and India will continue to invest heavily to increase their
output.
According to Zou: Brazil's CVRD plans to increase
investment by US$2.5 billion to raise annual output from 200
million to 300 million tons by 2008; Australia's BHP Billiton plans
to inject US$1.4 billion into exploitation to increase annual
output by 70 percent in four years; the UK's RioTinto plans to
increase investment in Australian mining areas by US$1.4 billion
before 2008; and India's mining department will do their best to
increase equipment and raise annual output from 120 million to
160-180 million tons.
Xinhua quoted RioTinto CEO Leigh Clifford as
telling China Business News that they would not only
increase investment in mining but also in equipment in areas such
as transportation.
The commerce ministry said the increase in supplies
from both these companies and new iron ore exporting countries will
increase 2006's oceangoing trade volume by 62 million tons from
that in 2005, while the increase in demand will not exceed 50
million tons.
China's investment in the iron ore industry has
grown markedly: in January to August, fixed asset investment
totaled 14.659 billion yuan (US$1.81 billion), a year-on-year
increase of 98.7 percent, and investment is expected to top 24
billion yuan (US$2.97 billion)?by the end of the year.
Zou said that, despite this, global iron ore
resources are still largely controlled by BHP Billiton, CVRD and
RioTinto, which will increase difficulties in price
negotiations.
The ministry official said that in 2006 the world
steel market would be stable, but that major European and US steel
companies will limit steel output to maintain prices, so demand for
iron ore will not increase greatly.
The official forecast that China's iron ore imports
would increase 35 million tons next year, a sharp fall from this
year's growth rate.
In the first 10 months of 2005 China imported 220
million tons of iron ore worth US$14.85 billion, year-on-year
increases of 32.2 and 44 percent respectively. The growth rates
were 6 and 135 percentage points lower than those in the same
period of 2004.
The official attributed the decrease in imports to
the government's macroeconomic control policy, which has resulted
in an oversupply of steel due to increasing supply and weakening
domestic demand.
The official also said that if the price of iron
ore continues to rise, the government may take part in the price
negotiations.
The ministry said it would closely monitor iron ore
imports, give timely analysis of price trends and provide
information for domestic companies.
It added that it would also intensify coordination
and supervision of imports, rectify and regulate them to ensure
stable supply and impel the price of iron ore to drop to a
reasonable level.
Qi Xiangdong, deputy secretary of China Iron and
Steel Association (CISA), was
quoted by Xinhua as predicting that the global iron ore market
would not undergo big fluctuations next year, but was not stable
yet.
(China.org.cn by Yuan Fang, December 12, 2005)