prospects for china's iron ore imports

9
Although China has a large volume of iron ore deposits the grade of iron ore is very low. This has led to unfavour- able conditions for developing China’s iron and steel industry. In particular the big steel plants in East China have faced severe shortages of iron ore. China is a large developing country and the demand for finished steel is in- creasing rapidly. Consumption growth of finished steel cannot depend entirely on increased imports of steel. China will therefore develop its local iron and steel industry vigorously. In the coming ten years China’s resource policy for iron ore is for the greater part to depend on domestic mining, but there will also be a step by step expansion of imports. As a result China’s share of world trade in iron ore is expected to rise. The author is with the Institute of Industrial Economics, Chinese Academy of Social Sciences’ Theoretical Department, 2 Yuetan Beixidojie, Beijing, PR China. This paper was written while the author was visiting the Economics Department, University of Adelaide. An earlier version of this paper was presented at the Minerals and Enemy Forum specialist group meet- ing on ‘China and Pacific cooperation in steel’ held in Beiiina in Januarv 1989. The author is gratefuito‘br Christopher Findlay for his comments on the draft of the paper and to an anonymous referee. All errors and opinions are those of the author. Prospects for China’s iron ore imports Lu Zhen Iron ore deposits have been discovered in 1 760 sites in China. These sites are found in more than 600 counties in 27 provinces. The deposits of iron ore throughout the whole country total 472 000 million tonnes, of which 24 600 million tonnes are economically recoverable. China’s iron ore deposits in the north-east, the north and south-west make up 71% of the national total and 20% is to be found in the east and the mid-south. China has seven large mine areas whose deposits make up 65% of the total. These are situated in Anshan and Bengxi. east of Hebei and Miyun, in Panzhihua and Xichang, in Ningwu and Lohe, east and west of Hubei, and in Baotou, Beiyunobo and Hanxing (see Figure I). China’s iron ore resources are mainly to be found in sedimentary and metamorphic rock. This type of iron ore deposit makes up over half of the total amount and is mostly magnetic lean ore, of which there are extensive deposits. Most of the mines are open cut, for ease of mining and dressing. The majority are distributed in Hebei, Shanxi and Niaoning provinces. Magmatic deposits make up about a quarter of China’s total deposits. The majority is magnetic lean ore composed of vanadium and ilmenite and also containing traces of titanium, cobalt, nickel, copper, sulphur, chromium, platinum etc. The majority of this kind of iron ore is distributed in the Panzhihua-Xichang area. Other types of iron ore make up the balance of the total amount. The quality of China’s iron ore is comparatively poor. Lean ore. with an average iron content of 32.1%, makes up 97.8% of the total deposits. The iron ore industry The development of Chinu’s iron ore mining industry From 1950 to 1985 China invested more than 12 billion yuan (RMB) (or about US$3.2 billion) in iron ore mining. By the end of 1985 it had built up a total annual mining capacity of 158.6 million tonnes and an annual mineral concentration capacity of 135.3 million tonnes (see Tables 1 and 2). In 1985 China’s total iron ore output was 131.44 million tonnes and its total iron ore concentrate output was 43.83 million tonnes (iron ore concentrate is ore dressing from raw iron ore). During the period of the sixth five-year plan (1981-85) iron ore output increased by an average of 4.1% annually (see Table 3). Six of the national key iron and steel 0301-4207/90/020095-09 0 1990 Butterworth-Heinemann Ltd 95

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Page 1: Prospects for China's iron ore imports

Although China has a large volume of iron ore deposits the grade of iron ore is very low. This has led to unfavour- able conditions for developing China’s iron and steel industry. In particular the big steel plants in East China have faced severe shortages of iron ore. China is a large developing country and the demand for finished steel is in- creasing rapidly. Consumption growth of finished steel cannot depend entirely on increased imports of steel. China will therefore develop its local iron and steel industry vigorously. In the coming ten years China’s resource policy for iron ore is for the greater part to depend on domestic mining, but there will also be a step by step expansion of imports. As a result China’s share of world trade in iron ore is expected to rise.

The author is with the Institute of Industrial Economics, Chinese Academy of Social Sciences’ Theoretical Department, 2 Yuetan Beixidojie, Beijing, PR China.

This paper was written while the author was visiting the Economics Department, University of Adelaide. An earlier version of this paper was presented at the Minerals and Enemy Forum specialist group meet- ing on ‘China and Pacific cooperation in steel’ held in Beiiina in Januarv 1989. The author is gratefuito‘br Christopher Findlay for his comments on the draft of the paper and to an anonymous referee. All errors and opinions are those of the author.

Prospects for China’s iron ore imports

Lu Zhen

Iron ore deposits have been discovered in 1 760 sites in China. These sites are found in more than 600 counties in 27 provinces. The deposits of iron ore throughout the whole country total 472 000 million tonnes, of which 24 600 million tonnes are economically recoverable. China’s iron ore deposits in the north-east, the north and south-west make up 71% of the national total and 20% is to be found in the east and the mid-south. China has seven large mine areas whose deposits make up 65% of the total. These are situated in Anshan and Bengxi. east of Hebei and Miyun, in Panzhihua and Xichang, in Ningwu and Lohe, east and west of Hubei, and in Baotou, Beiyunobo and Hanxing (see Figure

I). China’s iron ore resources are mainly to be found in sedimentary and

metamorphic rock. This type of iron ore deposit makes up over half of the total amount and is mostly magnetic lean ore, of which there are extensive deposits. Most of the mines are open cut, for ease of mining and dressing. The majority are distributed in Hebei, Shanxi and Niaoning provinces. Magmatic deposits make up about a quarter of China’s total deposits. The majority is magnetic lean ore composed of vanadium and ilmenite and also containing traces of titanium, cobalt, nickel, copper, sulphur, chromium, platinum etc. The majority of this kind of iron ore is distributed in the Panzhihua-Xichang area. Other

types of iron ore make up the balance of the total amount. The quality of China’s iron ore is comparatively poor. Lean ore. with an average iron content of 32.1%, makes up 97.8% of the total deposits.

The iron ore industry

The development of Chinu’s iron ore mining industry

From 1950 to 1985 China invested more than 12 billion yuan (RMB) (or about US$3.2 billion) in iron ore mining. By the end of 1985 it had built up a total annual mining capacity of 158.6 million tonnes and an annual mineral concentration capacity of 135.3 million tonnes (see Tables 1 and

2). In 1985 China’s total iron ore output was 131.44 million tonnes and its

total iron ore concentrate output was 43.83 million tonnes (iron ore concentrate is ore dressing from raw iron ore). During the period of the sixth five-year plan (1981-85) iron ore output increased by an average of 4.1% annually (see Table 3). Six of the national key iron and steel

0301-4207/90/020095-09 0 1990 Butterworth-Heinemann Ltd 95

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Prospects for China’s iron ore imporfs

r

Anshan and Bengxi

East of Hebei and Miyun

Panzhihua and Xichang

Ningwu and Lohe

East and west of Hubei

Baotou and Beiyunobo

Hanxing

Figure 1. Distribution map of key iron mines.

‘Mineral separation includes two working proce- dures: raw mine handling which is, after mrning, removing big impurities from the raw ore: refined dust iron which is, after raw ore handling, making further ore dressing, including breaking, flotation or separating by magnetic forces.

Source: Iron and Steel industry Almanac of China 1985 and 7986, Metallurgical industry Press, Beijing, 1985 and 1986.

96 RESOURCES POLICY June 1990

enterprises (the Shoudu iron and steel company, Anshan iron and steel company, Benxi iron and steel company, Baotou iron and steel com- pany, Kiuquan iron and steel company and Panzhihua iron and steel) have become self sufficient in iron ore.

Principal technical economic indices of China’s iron ore production

China’s iron ore mining equipment has passed through three stages. In the first stage, during the early 195Os, manual labour was widely utilized. In the second stage semimechanization together with medium- and small-scale mechanization developed. In the third stage mining equipment progressively developed, leading toward large-scale mod- ernization. During the period of the sixth five-year plan China intro-

Table 1. Addition to production capacity of China’s iron ore mining (thousand tonnes).

Year Iron ore mining

1949-52 320 1953-57 13 880 1956-62 21 020 1963-65 3 040 1966-70 40 320 1971-75 45 870 1976-80 20 970 1981-85 13 410 1981 4 750 1982 3100 1983 300 1984 460 1985 4800 1986 9 925

Mineral separation.

Raw ore handling Refined dust iron

320 344 a 490 3 655

18 940 6645 5 042 269.8

19 120 7 946 47 341 20 135 23 393 10544 12 654 6 089 2 490 1 045 1 900 1 019

1 670 830 659 3 195

2500 1 070

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Prospects for China’s won ore imports

Table 2. Production capacity of iron ore mining at the end of the year (1961-66), (million tonnes).

Item 1961 1962 1983 1964 1965 1966

Total mining capacity 119.1 140.0 140.2 145.7 158.6 158.9 Key mines 92.7 109.9 109.2 113.9 122 116.3 Middle-sized and small mines 26.3 30.1 30.85 31.6 36.6 42.6

industry Almanac of Total ore dressing capacity 120.0 120.5 122.1 124.3 128.41 Source: iron and S&e/ 136.98 Key manes 97.7 103.2 103.8 104.8 99.9 105.86 China 1987, Metallurgical Industry Press, Bei- Middle-sized and small manes 22.3 17.3 18.3 15.5 28.5 31.12

jing, 1987.

aThe average grade of lean ore is 32.1% iron content and the average grade of rich ore IS 50%. bAgglomerate is iron ore concentrate added to coal and lime, then used as Input to blast fur- naces for smelting iron.

Source: Iron and Steel Industry Almanac of China 1986. Metallurgical Industry Press, Bei- jing, 1986.

Table 3. Output of iron ore and iron concentrate and agglomerate (thousand tonnes).

Year

1952 1957 1962 1965 1970 1975 1980 1981 1982 1983 1984 1985

Iron ore*

Lean ore Rich ore

1 330 2 960 11660 7710 17 570 8210 22010 9 480 40 500 23 720 68 710 28 220 89 730 22 820 82 210 22 380 84 700 22 620 88 860 24 530 99 280 27 430

111210 25 890

Iron ore concentrate Agglomerateb

840 1 380 4 500 7 400 7 070 11490 9 160 15980

17 480 25 380 28 100 40 490 38 940 60 020 35 050 54 920 35 280 54 920 37 620 60 900 41 050 69 070 43 800 70 970

Table 4. The technical economic indices of iron ore mining from 1979 to 1964.

Year

1979 1980 1981

Open cut iron ore mines Ct4.6 rn’ electric shovel 201 motor overall labour productivity efficiency efficiency (t/man Y) (thousand t/ motor y) (thousand t/y)

3617 1 238.7 111.7 2 498 1 221.6 116.6 3 357 1 131.3 99.5

1982 3 445 1 189 Source: Iron and Steel tndusfry Almanac of

85.7 1983 3 483 1 225.8 107.9

China 198.5, Metallurgical Industry Press, Bei- 1984 3 824 1 276 128.6 jing, 1985.

Table 5. The technical economic indices of iron mines in 1964.

Item Indices Unit

‘The cost is before tax.

Key open cut iron mines Overall labour productivity Electric shovel efficiency Opening drill efficiency Electric locomotive efficiency Motor efficiency (27 tonnes) Motor efficiency (20 tonnes) Cost of iron ore Cost of iron ore concentrate

3 824 Uman y 1 276 thousand Vy

14 141 WY 4 913.7 thousand tkm/y

284 thousand tkmly 162.3 thousand tkm/y

8.9 RMB yuanJP 42.45 RMB yuanJP

Source: iron and Steel Industry Almanac of Key ore dressing plants

China 1985. Metallurgical Industry Press, Bei- Overall labour productivity 1 901 t/man y

jing, 1985. The grade of iron ore 62.06 Iron content in iron ore(%)

duced and made over 10 million large electric shovels, 100-170 tonnes of large motor belt conveyers, large bulldozers etc. But, from an overall point of view, China’s equipment levels at iron mines are not very high as there is not enough large equipment. For example, over 60% of open cast mines depend on railway transport to carry iron ore and only 35% depend on motor transport. Tables 4, 5 and 6 list the principal technical economic indices of China’s iron ore mining. These tables highlight the variation in labour productivity. even among the key enterprises, the degree of variation in ore quality and the high stripping rates faced by some mines.

RESOURCES POLICY June 1990 97

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Prospects for China’s iron ore imports

The stripping rate refers to the stripping of the clod and the rock for mining iron ore per tonne.

Source: Statistics of Iron and Steel industry of China 1988.

Source: bon and Steel industry Almanac of China 1985, Metallurgical Industry Press, Bei- jing, 1985.

Source: iron and Steel industry Almanac of China 1985 and 1987, Metallurgical Industry Press, Beijing, 1985 and 1987.

Table 6. Principal technical economic indices of key open cut iron mines in 1985.

Iron and steel company key enterprises average

Shoudu Anshan Taiyuan Baotou Maanshan Wuhan Hainan Panzhihua

Labour productivity Grade of Stripping (t/man year) raw ore (%) rate. (t/t)

5 661 32.29 2.31 11945 26.78 2.71 6 905 32.35 3.32 4564 29.00 1.70 5 568 35.77 2.10 5 351 33.82 1.65 2 999 45.65 6.30 2 331 53.16 2.31 4 030 31.02 1.67

Table 7. Iron ore exfactory price (after July 1964) (RMB yuan/tonne).

Grade Iron ore Dust iron

(%) concentrate ore

66 65 64 63 62 61 60 59 58 57 56 55 54 53 52 51 50 49 48 47 48 45 44 43

74.50 72.50 70.50 68.50 66.50 62.50 61 .OO 59.50 59.00 56.50 56.90 55.00 84.00 53.00 52.00 51.00 50.00

55.00 55.00 45.00 52.50 52.50 42.50 50.00 50.00 40.00 47.50 47.50 37.50 45.00 45.00 35.00 43.50 43.50 33.50 42.00 42.00 32.00 41 .oo 40.50 30.50 52.00 40.00 29.00 39.00 37.50 28.50 38.00 36.00 27.50 37.00 35.00 26.50 36.00 34.00 25.50 35.00 33.00 24.00 34.00 32.00 23.50 33.08 31 .oo 23.00 32.09 30.00 22.50 31.00 29.00 22.00

Lump of iron Crude iron Iron ore ore for blast ore for blast for open furnace furnace hearth

74.50 71.50 68.50 65.50 62.50 60.00 57.50 55.00 52.50 50.00

Table 6. import price of iron ore.

Year

1980 1981 1982 1983 1984 1985 1986

Grade Trade price

(%) (Uwt)

62 14.0 62 16.4 62 16.24 62 20.87 62 15.67 62 17.70 82 26.20

Yuan

21 .o 28.0 31 .o 41.3 36.4 52.5 97.2

Exchange rete (US$l = RMB)

1.50 1.70 1.91 1.96 2.33 2.94 3.71

The price of China’s iron ore

Until 1984 domestic Chinese iron ore prices were not high enough for iron mining enterprises to earn a profit. As a result the development of productive forces in the industry was hindered. In July 1984 the Chinese State Price Bureau together with the Metallurgical Industry Department decided to raise the exfactory price of iron ore (see Table 7). The exfactory price is defined as the price that the mining enterprises receive for sales to iron smelting enterprises. The average increase was 15-20 (US$6.5-8.7) y uan per tonne of iron ore, an increase of about 30%. For the import price see Table 8.

RESOURCES POLICY June 1990

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Prospects for China’s iron ore imports

Table 9. Volume of imported iron ore (placer).

Total volume Total value Import price Year (thousand 1) (US$ million) (USW

1981 3 336.4 5471 16.4 1982 3 451.5 56.07 16.24 1983 4 348.7 91.54 20.87 1984 5 969.8 93.59 15.67

Source: Statistics from iron and Steel Industry 1985 10 114.0 179.09 17.70 Almanac of China 1986 and 1987, Metallurgical 1986 12 004.0 314.56 26.20 Industry Press, Beijing, 1986 and 1987.

China’s iron ore imports

In the early 1980s the Chinese government decided to use imported as well as domestic iron ore. A Chinese government leader once said,

We must develop our strong points and overcome our shortcomings as far as possible. That is the problem of iron ore. In the past we depended completely on domestic iron ore, but from the national point of view. most of our iron mines contain lean ore, and this must be transported for long distances. Because the iron ore production process is very complex, large-scale investment is needed and construction periods are very lengthy. So it has been very difficult to develop the iron and steel industry. Measures must be instituted to overcome these difficulties. It is not necessary for us to engage in all stages of the production process. Some enterprises can import iron ore, particularly those iron and steel enterprises in coastal areas. If these areas lack iron ore resources, they can import iron ore from foreign countries, and even import crude steel, rolled steel that is, because the final stage of production is the most profitable in China. We can thus begin to develop the iron and steel industry from the point of iron ore or crude steel imports.

In line with this policy, and in order to adapt to the needs of the developing iron and steel industry. the quantity of iron ore imported into China has continually increased over the past several years (see Table 9). This policy is unlikely to change because of the targeted high rates of growth and steel output in China.

From 1981 to 1985 the cumulative total of iron ore produced by China was 589.71 million tonnes. According to the ratio of iron ore to pig iron, which was 3.4:1 in the same period, China could have produced 173.40 million tonnes of pig iron from 589.71 million tonnes of iron ore. During the sixth five-year plan period China imported 27.25 million tonnes of iron ore and could have produced 16.90 million tonnes of pig iron from imported iron ore. China also imported 4.79 million tonnes of pig iron, exported 1.67 million tonnes of pig iron and consumed 193.42 million tonnes of pig iron internally. So China’s rate of self sufficiency in pig iron or iron ore average was 90% during the sixth five-year plan period but this percentage fell to 80.25% in 1986 (see Table 10). Australia supplied 70% of total imports. Other sources were India and North Korea. It is possible that Chinese imports of iron ore from the USSR will increase in the future.

Some specialists in the Chinese metallurgy industry argue that in order to make up for a deficiency in internal resources it is essential to import iron ore. However, we should not rely entirely on markets in foreign countries and we must give priority to producing our own iron ore and regard iron ore imports as a subsidiary supply source. The reasons are as follows:

0 China’s iron ore deposits of economically recoverable ore are 24 600 million tonnes. If the country mines 300 million tonnes per

RESOURCES POLICY June 1990 99

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Prospects for China’s iron ore imports

Table 10. China’s output, imports and exports of pig iron from 1980-88 (thousand tonnes).

‘Equals net imports of pig iron divided by the sum of pig iron output and net imports.

Source: iron and Steel industry Almanac of China 1987, Metallurgical Industry Press, Bei- jing, 1987.

Table 11. Output of iron ore in medium- and small-sized iron and steel enterprises in 1985 (thousand tonnes).’

Province Output of iron ore

Total 29 206.4 Hebei 5 550.7 Shanxi 4 682.5 Inner Mongolia 209.5 Liaoning 1 097.1 Jiling 791.2 Heilongjiang 145.8 Jiangsu 823.0 Zhejiang 395.2 Anhui 1 843.4 Fujian 910.3 Jiangxi 787.7 Shandong 1 395.2 Henan 909.4 Hubei 132.75 Hunan 909.4 Guangdong 2 745.2 Guangxi 775.5 Sichuan 1 693.8 Guizhou 703.7 Yunnan 947.2 Shanxl 167.1 Gansu 23.7 Ningxia 27.2 Xinjian 434.3

aNot including the output of iron ore by peasant households.

Source: Statistics from iron and Steel industry Almanac China 7986, Metallurgical Industry Press, Beijing, 1986.

‘Lo Shuo, ‘Making use of two resources for developing iron and steel industry’, and Du Chunning, ‘General condition of resources of iron ore in China’, iron and Steel Indus- try Almanac of China 7985, Metallurgical Industry Pres, Beijing, 1985; Li Peining. ‘The new achievements in iron mines in- dustry’, Iron and Steel industry Almanac of China 1987, Metallurgical Industry Press, Beijing, 1987.

Item 1980 1981 1982 1983 1984 1985 1986

Output of pig iron 38 020 34 170 35 500 37 380 40 010 43 840 50 640 Output of pig iron by internal

iron ore 34 670 32 170 33 430 34 760 36410 37 780 43 440 Output of pig iron by imported

iron ore 3 350 2 000 2 070 2 620 3600 6 060 7200 Imported pig iron 353 12 0 748.4 1118 2 910 2804 Exported pig iron 87.3 343 1 252 .68 6.6 4.2 3 Net imports of pig iron as a percent- age of total pig iron consumption (%)” 9.4 4.9 2.4 8.8 11.8 20.5 19.75

0

0

0

year it will be able to mine for 80 years. There is thus a great deal of difference between conditions in China and Japan, for example. China’s cost of raw ore is 8.9 yuan (RMB) per tonne only and the cost of iron ore concentrate (the grade being 62%) is 42.45 yuan (RMB) per tonne. In 1985 domestic raw ore was 9.6 yuan (RMB) cheaper than imported iron ore (the price of imported iron ore is US$17.7 x 2.94 = 52.5 yuan). In China, the price of iron ore has been low and one important target of the price system reform is to raise the price of all raw materials, finished steel, aluminium etc as well as iron ore. This reform will promote development in mining and increase the supply of iron ore. But overall China will still be short of iron ore in the future, and the change in the price of iron ore will not change the phenomenal demand for it. The iron ore output of local small- and middle-sized mines is more than 30% of total output and has great potential. Peasants could mine iron ore and sell it to the state owned mines, which would increase the output of iron ore. The Chinese Ministry of Metallur- gical Industry in conjunction with local governments plans to encourage the output of ten counties and is working for an iron ore output per county of one million tonnes in 1990. China’s foreign exchange capacity is limited, so that it is unable to depend on imports of iron ore.

The Chinese government has carried out a policy under which the masses are encouraged to undertake mining enterprises and thereby bring into play local mining initiatives to replenish iron ore supplies. In 1985 the iron ore output of China’s small- and middle-sized local mines came to 29.20 million tonnes, an increase of 21.9% on 1984 (see Table 11). For example, the iron ore output of Wuan county in Hebei province was 2.5 million tonnes in 1985; not only does it supply more than seventy iron and steel enterprises but it has also facilitated local economic development. ’

China’s iron ore requirements, 1987-2000

In order to analyse China’s iron ore demand from 1987 to 2000 we must first of all analyse development trends for China’s iron and steel production over the next 13 years.

In 1985 China’s crude steel output was 46.79 million tonnes, an increase of 9.67 million tonnes from 1980. This represents an average annual increase of 1.93 million tonnes. During the sixth five-year plan period the crude steel output average increased by 4.7% per year.

100 RESOURCES POLICY June 1990

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Prospects for Chinu’s iron ore imports

Table 12. A forecast of China’s steel output and demand for pig iron and iron ore (thousand tonnes).

output of Pig iron Demand for Demand for iron Year steel. steel pig ironb ore (lean ore)b

1987 56000 0.92 51 500 175 000 "Average annual growth 4.23% 1990 62000 0.90 55800 from 189700 1987-

2000. 1995 77000 0.88 67800 230500

bAverage annual growth 3.7%. 2000 96000 0.86 82500 280500

China’s output of crude steel increased to 56 million tonnes in 1987. It is estimated that in the next 13 years it is possible for China’s crude steel output to keep increasing at the rate of 4.23% per year. China’s output of crude steel will reach 96 million tonnes in 2000.

How much iron ore is needed for smelting 96 million tonnes of crude steel? That depends on the consumed volume of pig iron and the consumed volume of pig iron depends on the ratio between pig iron and crude steel. This ratio averages around 0.70 in the USA, Japan and FR Germany ie 0.7 tonnes of pig iron is consumed in smelting one tonne of crude steel and scrap steel makes up the difference. China’s ratio of pig iron consumption to crude steel production has been around 0.93 since 1983. As the volume of scrap steel used in smelting steel in China increases the ratio of pig iron consumption to crude steel output is likely to fall to an estimated 0.86 by 2000.

The ratio between pig iron consumption and steel output depends on several factors, including the increasing supply of scrap and the decreas- ing use of pig iron for foundry iron. During the sixth five-year plan China’s use of pig iron for foundry iron made up 20% of the total output of pig iron. This percentage will certainly fall to an estimated 10% by the year 2000. So when China’s output of crude steel reaches 96 million tonnes about 82.50 million tonnes of pig iron will be consumed (including foundry and other pig iron consumption). Because the average grade of iron ore is only 32.1% in China, smelting an average of one tonne of pig iron needs 3.4 tonnes of iron ore and smelting pig iron of 82.50 million tonnes needs 280.50 million tonnes of iron ore. For a forecast of the increase in China’s crude steel output and demand for pig iron and iron ore see Table 12.

China’s iron ore supplies, 1987-2000

If China’s crude steel output reaches 96 million tonnes by 2000 it will require the supply of 280.50 million tonnes of iron ore (with a grade of 32.1%). In 1985 China’s mining capacity was 158.60 million tonnes, the output of iron ore was 137.10 million tonnes, 87% of mining capacity. Table 13 gives the condition of iron ore mining capacity and output of iron ore in China.

Table 13. Iron ore mining statistics.

Production capacity Output of iron ore Ratio Year (million t) (million t) (output/capacity)

1978 134.40 117.79 0.87 1980 118.57 112.58 0.95 1981 119.12 104.59 0.88 1982 140.00 107.32 0.77 1983 140.15 113.39 0.81

Source: Irofl and Steel industry 1984 Almanac of 145.68 126.71 0.87 China 1987, Metallurgical 1985 Industry 158.60 Press, Bei- 137.83 0.87 jmg, 1987. 1986 158.90 149.45 0.94

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Prospects for China’s iron ore imports

aAverage annual growth: 2.8%. bAverage annual growth: 3.9%.

Source: Author’s calculations.

Table 14. A forecast of China’s output of iron ore and total demand for iron (thousand tonnes).

Year

1987 1990 1995 2000

Production capacity Iron ore output Pig iron output Total demand

of iron ore’ in domestic mines” by internal ore’ for pig irot?

170 300 146 500 43 100 51 520 185400 159 500 46 900 55 800 213 700 183 800 54 000 67 800 244 100 210 000 61 700 82 500

China’s iron ore mining capacity needs to be 322.60 million tonnes to produce iron ore of 280.50 million tonnes, assuming 87% capacity utilization. From 1986 to 2000 China needs to increase its mining capacity by a further 164.00 million tonnes to be self sufficient. China’s

Table 15. A forecast of China’s imports of iron ore deposits decrease by about 2.5 million tonnes per year from iron ore (thousand tonnes). existing mines so the production capacity will drop by 37.5 million

Shortfall of Imports of iron ore tonnes from 1986 to 2000. In order to keep up its production capacity Year pig iron* (rich ore) from 1986 to 2000, China actually needs to further increase mining 1988 8000 13 300 1990 8 900 14 800 1995 13 800 23 000 2000 20 800 34 670

‘Equals total pig iron demand less pig iron pro- duced from domestic ore.

Source: Author’s calculations.

2Zhou Chuandian, ‘China’s developing goal in production and technique for iron and steel industry’, Iron and Steel Industry Almanac of China 7985, Metallurgical In- dustry Press, Beijing, 1985. 3World Bank, Price Prospects for Major Primary Commodities, Report No 614166, 1986. p31.

capacity by 204.6 million tonnes. According to estimates by specialists in China’s metallurgical indus-

try, China’s iron ore mining capacity can now increase by 120 million tonnes from 1986 to 2000.2 This represents an average increase of 3.8% per year. After deducting the natural loss in mining capacity by 37.50 million tonnes, China’s iron ore mining capacity will reach 241.10 million tonnes by 2000, an increase of 52% on that of 1985. The output of iron ore will come to 210 million tonnes which will produce approximately 61.70 million tonnes of pig iron from 210 million tonnes of iron ore at the present utilization rate.

According to estimates in Table 10 China’s total demand for pig iron will reach 82.50 million tonnes in the year 2000. But China’s pig iron output from domestic iron ore will only reach 61.70 million tonnes in 2000, a shortfall of 20.8 million tonnes. Therefore, in the year 2000 China’s rate of self-supplied iron ore will fall from 90% at present to 75%. China will need to import 34.67 million tonnes of rich iron ore with a grade of 62%. Currently the world’s trade volume of iron ore is about 220 million tonnes. China’s import volume of iron ore was 5.5% of the world’s total trade volume of iron ore in 1986. For a forecast of China’s output of iron ore, output of pig iron from domestic iron ore and total demand for pig iron from 1987 to 2000 see Table 14; for imports of iron ore see Table 15.

In 1985 China imported 10.114 million tonnes of iron ore and spent US$179.09 million of foreign exchange, the average price per tonne being US$17.7. According to forecasts by the World Bank the price of iron ore will reach US$24.1 per tonne in 2000.’ China will import 33.30 million tonnes of iron ore which will cost US$SO2.53 million. To keep pace with the steady growth of the Chinese economy and its expanding export and import trade, it will be necessary for China to import 34.67 million tonnes of iron ore.

During the sixth five-year period, China’s export revenue had an average growth rate of 8.4%. The total export volume reached US$27.36 billion in 1985 and US$30.9 billion in 1986, a 13% increase. The cost of foreign exchange for imported iron ore was US$314.56 million in 1986,1.02% of the total export revenue. It is estimated that in the next 13 years China’s average growth rate of export revenue will be over lo%, the total export revenue will be over US$120 billion and the expenses in foreign exchange for imports of iron ore will make up 0.67%

102 RESOURCES POLICY June 1990

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Prospects for China’s iron ore imporls

Table 16. A forecast of China’s imports of iron ore: lower crude steel output growth (thousand tonnes).

Year

1988 1990

Crude steel Total demand Shortfall of Imports of outpur for pig iron pig iron iron ore

59 200 52 300 8 000 13 300 62 500 56 300 9 400 15 700

aAverage annual increase by 4% In 1990s. 1995 77 500 68 200 14 200 23 700 2000 92 500 78 600 16 900 28 100

Source: Author’s calculations.

of the total export revenue. However we also have to consider that China’s port installations are still backward and that strengthening these will be the key to an expansion of iron ore imports.

The above analysis is an optimistic estimate for an increase in China’s steel output and iron ore imports over the next 13 years. On the basis of the situation which has developed in China’s iron and steel industry over the past ten years, even according to the most conservative estimates China’s crude steel output will exceed 60 million tonnes in 1990. In the 1990s with an average increase of more than three million tonnes per year, that will be an average increase of 4% per year, China’s crude steel output will reach 92.50 million tonnes by 2000. If China’s iron ore output keeps increasing by 2.9% per year from 1986 to 2000, China’s demand for iron ore imports will be lower than that forecast in Table 15 (see Table 16). Th e ratio of iron ore which China supplies itself to that which it imports will be 79:21 by 2000. According to the analysis in Tables 14 and 15, in 2000 the upper limit for China’s iron ore imports will be 34.67 million tonnes and the lower limit will be 28.10 million tonnes. Forecasting levels of global iron ore trade is very difficult but China’s share of world trade in ore seems certain to rise, possibly doubling by the end of the century.

RESOURCES POLICY June 1990 103