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China's Iron Ore Demand To Slow In 2006

China's demand for iron ore is expected to fall sharply in 2006, amid stricter regulations for its thousands of small producers of the key steel ingredient, the government claimed March 24. The National Development and Reform Commission (NDRC), a key government body, said that regulations governing small steel mills and iron producers will reduce demand for iron ore by about 60 million tons this year.

The announcement comes as deadlocked price negotiations between China's largest steel firm and the globe's biggest suppliers of iron ore are set to restart next week. Baosteel, which is leading the discussions for all Chinese firms, is trying to secure the cheapest possible price from the world's three largest exporters -- Australia's Rio Tinto, BHP Billiton and Brazil's Companhia Vale do Rio Doc.

The commission's report said China's iron ore demand this year is expected to reach 572 million tons, up 59.83 million tons from last year. In 2005 demand for the raw material rose by 121.76 million tons from a year earlier.

China, the world's largest consumer of iron ore, said the country's own output of the commodity in 2006 was forecast to rise 120 million tons to 540 million. "That means an increase of 120 million tons from last year. This is expected to replace around 60 million tons of imports," the report said.

Major international iron ore producers will also increase their output this year, of which Australia, as China's largest supplier, is expected to increase output by 70 million tons.

Copyright Agence France-Presse, 2006

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