China bans low grade iron ore import

REUTERS, QINGDAO, China | 09 April 2010 20:41 IST

China's iron ore trading association has banned its members from importing ore with a less than 60 percent iron content, three trade sources said on Thursday.

The ban by the China Chamber of Commerce of Metals, Minerals and Chemicals Importers and Exporters (CCCMC) covers trading firms but not steel mills and their licensed agents, the sources said.

One Shandong-based trader said it was part of a joint effort with the China Iron & Steel Association to "rectify" the sector.

"This is absolutely crazy. I can understand why they want to regulate the market and improve the quality but this will do nothing but drive up the prices of higher grade ores," said a Hong Kong-based trader attending a steel conference in Qingdao.

One owner of a privately-held group of iron ore mines based in Hong Kong said deliveries of Indion ore with 55 percent Fe content were already being blocked on Thursday.

 China is the world's top iron ore buyer because its own supplies are insufficient to supply its steel sector, which last year produced almost half the world's steel. Most of its imports come from Australia, Brazil and India.

"This is a surprise. We don't know what the rationale behind this is because most of the steel mills in China do need low grade ores," said Glenn Kalvampara, secretary of Goa Mineral Ore Exporters' Association, speaking from the western Indian state of Goa that mostly exports low grade ores to China.

"Earlier there was some news on China wanting to reduce the number of importers. But this is a total surprise," he said.

 "China is issuing contradictory statements," said Vipul Sachdeva, a trader based in New Delhi. "On one hand they are saying reduce imports from Rio and Vale. On the other hand they are saying they don't want low grade ores. Where are they going to get their feed from?"

Sachdeva said India's exports could suffer as low grades comprise 40 percent of India's total exports. Almost all of India's exports go to China, which has imported 106 million tonnes of Indian ore in the last 12 months.

CISA has previously blamed small traders for undermining its position in benchmark price talks with foreign miners last year. Iron ore trading deals have hit world headlines in the past month after four Rio employees admitted taking bribes from small steel mills hoping to get access to supplies at term contract prices.

CISA has vowed to substantially reduce the number of licensed importers and impose strict "guidance prices" for iron ore, but has not had the clout to implement its plans.

Its repeated calls for unity and threats to squash traders who undermine its attempts to impose discipline have had little obvious success and have had analysts scratching their heads.

Credit Suisse's Moore said in a note to clients this week that CISA's latest threats would be counterproductive, removing about 30 million tonnes per month of iron ore from the market, about 38 percent of China's consumption.


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