China Makes Up Its Mind: Iron Ore 中国终於下决心：大幅增加国内铁矿石供应

By newsdoug on June 13, 2011

China’s current dominance of rare earth production and solar panels are two reflections of Beijing’s determination to become a global leader in these sectors, which it has done through a series of generous subsidies and other government support. Next on its agenda, and an area that foreign companies would do well to watch, is the strategic and decidedly low-tech area of iron ore. Anyone who follows the steel sector knows that iron ore production is now dominated by foreign names like BHP (London: BHT), Vale (NYSE: VALE) and Rio Tinto (Sydney: RIO), which causes anguish with Beijing each year as its steelmakers negotiate new supply contracts that inevitably see the cost of iron ore climb. To end this cycle, Beijing has made up its mind to sharply boost iron ore production at home and become one of the world’s largest suppliers to feed its own steel-hungry construction and infrastructure sectors. Local media have reported that China intends to break the lock of foreign ore producers on the market by 2015, in part by boosting its domestic production to 1.5 billion tonnes per year — a nearly 50 percent increase from current output. At the same time, Beijing is pushing its domestic ore producers to more than double their overseas mining rights to 200 million tons by 2015. China's steels itself for iron-ore drive If it works, the big push will drop China’s dependence on foreign-supplied ore to 42 percent of its needs by 2015, from 63 percent last year, experts say. So, will it work? My answer is an unqualified “yes”, which will no doubt undermine the big global giants. In this case, China has plenty of domestic resources it can use to reach this goal, and it’s shown in the past that things like self-reliance in key areas like steel outweigh any economic issues like the high cost of achieving such self-reliance. Furthermore, it shouldn’t face any resistance from either foreign or its own provincial governments, as the former can hardly complain about this kind of domestic plan while the latter group will surely welcome such new investment in their provinces.

Bottom line: China’s plan to reduce its dependence on imported iron ore is almost 100 percent likely to succeed, undermining big international players like Rio Tinto, Vale and BHP.

Note: “China Makes Up Its Mind,” an occasional mini-column where I look at one of Beijing’s latest macro industrial policies, its chances for success and the potential impact on industry players.

中国目前在稀土生产与太阳能电池板领域的主导地位反应了北京方面的一大决心：成为相关领域的全球领头羊。中国业已提供了一系列慷慨补贴及其他政府扶持政策。它的下一个目标、也是外企特别关注的领域，那就是：战略意义重大、但科技含量不高的铁矿石。任何对钢铁行业有所了解的人都知道，现在的铁矿石生产由必和必拓<BHP.AX>、淡水河谷<VALE.N><VALE5.SA>与力拓<RIO.AX><RIO.L>等海外企业主导。每年中国钢铁企业谈判新的供应合同时，海外主导地位都让北京痛苦不已，铁矿石成本逐年攀升。为结束这种状况，北京下定决心大幅增加国内铁矿石生产，成全球头号供应国，以满足国内建筑与基础设施行业的迫切需求。据当地媒体报导，中国拟到2015年打破海外矿企的垄断地位，措施之一就是实现国产矿年产达15亿吨–比目前产量增加近50%。同时，北京方面还在推动国内矿商2015年前实现海外铁矿石的权益矿达2亿吨。专家分析称如果顺利达标，到2015年中国对外矿依存程度将从去年的63%降至42%。那麽，它到底行得通吗？我的答案是“YES”，这显然能够削弱国际矿业巨擘影响力。中国拥有丰富的国内资源来达到这一目标，而且过往案例证明对於钢铁等关键行业，自足问题胜过任何经济问题，比如说实现自足所需的成本等等。而且，海外与国内地方政府应该都不会带来任何阻力，因海外政府基本无法抱怨此类国内计划，而地方政府必然欢迎当地获此类新投资。

一句话：中国计划降低对外矿的依存程度，成功机率几乎100%，这将削弱力拓、淡水河谷与必和必拓等国际大企业的影响力。

备注：“中国决心已定”是我推出的迷你专栏栏目，主要探讨中国宏观产业政策动向、成功机率及对业界企业的潜在影响。