On August 14-16, 2020, 16th Steel Development Strategy Conference, hosted by SteelHome, was successfully held in Shanghai Tower. Around 800 delegates from governments, associations, steel mills, miners, traders, research institutes attended the one of biggest events in China steel industry.

9th International Raw Materials Supply Chain Summit, 10th Coal & Coke Development Strategy Conference, 8th China Commodities E-Commerce Summit and 2020 SteelHome Summer Report were simultaneously held.

Lei Pingxi, Chief Engineer of Metallurgical Mines' Association of China, delivered a speech titled China’s Iron Ore Operation in 1H2020 and Cost-Competitiveness Analysis, in 9th International Raw Materials Supply Chain Summit on August 15, 2020.

Lei Pingxi, Chief Engineer, Metallurgical Mines' Association of China

Key Points

The investment in China domestic iron ore fixed assets tumbled for years, which with no exception to 2020. Many domestic mining companies closed or exited, and the construction of large-scale mine projects repeatedly slowed down. The exploration and innovation did not meet the previous forecasts, which hampered China domestic iron ore output.  

Due to the COVID-19, bad weather conditions in Australia and facility maintenance, uncertainties over the global iron ore supply increased in 1H2020, bringing the iron ore production, shipments out of ports and inventory all at low levels.

The price, however, kept at high levels in China amid robust demand as well as dropping portside iron ore inventory. Therefore, the output of domestic mines increased. In H1 2020, China iron ore output reached 413.953 million tonnes, up 4.5% from the one in the same period last year.

In 2019, the average mining cost of China domestic-produced concentrate fines was around 371.14 yuan/t. with total costs at around 524.54 yuan/t, above the worldwide average of 55 yuan/t.

As long as the average CIF price of imported iron ore is higher than US$ 60 per tonne, China domestic mines can properly operate.

Summary

China domestic mines have certain comparative advantages with growth potential.

The output from domestic mines will not dramatically shrink as long as the average CIF price of imported iron ore is not below US$60 per tonne constantly.

To better utilize domestic and imported iron ore, reduce risks, and improve negotiating rights, China should keep self-sufficiency ratio for domestic iron ore stable.