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Domestic iron ore production system is plunging
Time:2019/4/12 11:59:56  Browse:time

China's domestic iron ore production system is "collapse"


According to a survey of 126 mining companies in China by the organization Mysteel, the capacity utilization rate of China's iron ore mines is only 55.7%. The utilization rate of China's iron ore mines is “continually refreshing new lows”, while “private mine owners are pessimistic,” said Huangste, an analyst at Mysteel, who told the “First Financial Daily” reporter.


The current price of iron ore has made many mines in the country unprofitable. At the end of November, Mysteel's imported iron ore price index hit a new low in parallel with the domestic mineral price index. On December 1, the Singapore Exchange’s iron ore January contract fell by $40/ton.


The low price of iron ore is due to the adjustment of the Chinese economy, especially the slowdown in investment in the real estate sector. According to the National Bureau of Statistics, from January to October 2015, China's real estate development investment was 7.8801 trillion yuan, a year-on-year increase of 2%, and the growth rate dropped 0.6 percentage points over the previous nine months. Compared with two years ago, the trend of slowdown in real estate investment growth is more obvious. In 2013, the national real estate development investment reached 860.13 billion yuan, an increase of 19.8% over the previous year.

Domestic iron ore production system is plunging

The real estate sector is China's largest steel demand industry, and the reduction in investment growth has further curbed demand for iron ore from steel and its raw materials.


For powerful international competitors, the depressed market is a good time to seize market share. Vale’s CEO, Fei Murray, told the “First Financial Daily” reporter that the company is expanding step by step, and its mine project with an investment of more than 15 billion US dollars has been completed nearly 70%. The other two major mine owners, Rio Tinto and BHP Billiton, are also on the road to capacity expansion.


Iron ore giants such as Vale have diversified resource reserves and are able to close high-cost mines and expand mining of low-cost mines at a low price to secure their market share. In the face of strong foreign competitors, the defects of the “endowment” of Chinese local mining companies are exposed. Domestic ore grades are lower than those of companies such as Brazil's Vale and Australia's BHP Billiton, and mining costs are high. In the downturn of the industry, domestic mines are difficult to sustain first.


According to Mysteel statistics, the domestic mine capacity utilization rate has now dropped to 55.7%. “The mines in the main producing areas have also begun to stop production,” Huang translated.


The first to go is the private mining enterprises. Huang Yi said that from the survey sample, the proportion of private mines that cut production and stop production is higher. The reason is that many private mining enterprises operate independently, and the mines in the state-owned system are mostly owned by state-owned steel enterprises, which are more resistant to market storms. At the same time, in the market trend, private enterprises have more flexible employment systems. Allowing them to “catch the market” layoffs to reduce costs.

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