Posted on 20 May 2016
China Iron & Steel Association, or CISA, Secretary General Liu Zhenjiang, Thursday called for iron ore miners to focus on long-term co-survival with Chinese steel mills, instead of seeking short-term margins out of price volatility.
"Iron ore is the core steelmaking raw material, and we need to realize that the two have to co-exist, and only a win-win deal can guarantee sustainable development for both sides," Liu said at the SGX Singapore Iron Ore Forum Thursday.
Liu reflected on the growing correlation between China's domestic steel prices and iron ore price movements — especially since the beginning of this year — as an example, and said that "this has been an important enlightenment to both, illustrating that both parties need to make efforts to maintain a fair and stable market order."
The CFR China iron ore import price hit a new high at $70.5/dmt on April 21, mainly because of the domestic steel price surge, and then it receded to around $57/dmt May 18 with the softening in Chinese steel prices, according to Platts 62% Fe Iron Ore Index.
China will still continue to import a high volume of iron ore in the coming years for its steel making, Liu said.
China had imported 953 million mt of iron ore for 2015, compared to 933 million mt for 2014.
In the long run, however, with the accumulation of steel produced in China over the years, the country will definitely increase scrap utilization.
This increase in the usage of scrap is also supported by growth in electric arc furnace steelmaking and the country's maturity in steel recycling.
So, "now is the time for iron ore producers to make the best of the opportunity to secure a steady supply and mutually-beneficial pricing scheme with Chinese steel mills, instead of seeking those short-time gains during iron ore price volatility," Liu stressed.
China's steel output accumulated since the People's Republic of China was established in 1949 will exceed 10 billion mt by 2016, which will be a huge reserve for steel recycling as a source of scrap, Liu said.
