The low price of iron ore from India is helping the Chinese government to go on an overdrive on infrastructure projects. An official of Sinosteel Corporation, a Chinese-government-owned company having a global presence, told FE that the central government of China has declared a $4,000 billion package. So have the various state governments of China, on the basis of which the Chinese steel producers has once again started full scale operation as well as augmenting capacities.
Indian iron ore is currently priced at an average $50 per tonne free on board (f.o.b) down from $150 per tonne f.o.b during May 2008. The Indian iron ore prices has prompted Chinese Iron and Steel Association (CISA) to put pressure on Rio-Tinto and Vale to cut prices by at least 50%, the official said.
Rio Tinto, the world?s second largest supplier, is selling iron ore fines at an average of around $93 per tonne, a benchmark price which the Chinese steel makers are wanting to bring down at the Indian iron ore price level. ?Since China is the world?s largest consumer of iron ore, China has the strength to regulate prices,? the official said.
A BHP Billiton official said that the company was considering cutting iron ore production by 25% as a strategy to create supply constraint, which may help preventing de-escalation of prices.
BHP, the world?s third largest iron ore producer, is likely to cut iron ore production by 30 million tonne in 2009 from its mines in Western Australia. It has already cut 4 mt of iron ore production in the last two months in 2008, in view of the slump in prices.
India?s iron ore export jumped 39% to 13.6 mt in December 2008 against 9.8 mt in December 2007. In November 2008, major ports in India registered a negative growth of 6.62% in iron ore exports; the growth in December went up to a negative of 0.62%, thus registering a 6% growth in a gap of 30 days, according figures available from Indian Port Association (IPA).
The gradual spurt in iron ore exports since the year 2000 has put the number of iron ore exporters in India from around 70 in 1999 to around 600 at present, according to IPA.