China, the world's largest-iron ore consumer, probably won't increase imports next year, the first time they haven't risen in at least eleven years because of slowing demand from steel mills, an industry group said.
Imports may remain at 400 million metric tons next year, unchanged from 2008, Zou Jian, chairman of the China Metallurgical Mining Enterprise Association, said in an interview yesterday in Beijing. The demand slump will show up in import figures in the next two months, Zou said.
Chinese steelmakers are slashing output because of declining orders from builders and carmakers amid the slowest economic growth in five years. Contract iron ore prices may drop next year, the first in seven, hurting profits at Cia. Vale do Rio Doce, Rio Tinto Group and BHP Billiton Ltd., analysts said.
''Iron ore consumption will keep slowing to at least the first quarter, or even longer,'' said Helen Lau, a Shanghai-based analyst from Daiwa Securities Group Inc.
Brazil's Vale and Rio Tinto, the world's two largest iron ore suppliers, have announced production cuts because of reduced demand from China. Imports dropped 22 percent in October to 30.6 million tons from the previous month, China's Customs General Administration said Nov. 11.
Domestic iron ore mines that started in the past five years are losing money, and some have closed, Zou said. More may shutter as prices of the raw material continue to fall, he said.
Falling Prices
Cash prices of iron ore imported by China have tumbled 62 percent since May 9, according to Beijing Antaike Information Development. Contract iron ore prices charged by Vale, Rio and BHP may drop 40 percent next year, UBS AG said.
Iron ore contract prices are negotiated on an annual basis. That may change pending discussions between the producers and steelmakers, Zou said. Price talks may be delayed because of the financial turmoil, Nippon Steel Corp., the world's second-largest mill, said Nov. 7.
China will produce between 380 million and 390 millions of iron ore concentrate this year, up from 340 million tons a year ago, Zou said. Chinese ore tends to be of lower quality than those imported from Brazil and Australia, the world's two largest exporters of the raw material.
Chinese steelmakers may cut output by 20 percent next year, Beijing-based steelmaker Shougang Corp. said Nov. 10.
The Chinese government on Nov. 9 announced a 4 trillion yuan ($586 billion) stimulus plan to revive growth in the world's fourth-largest economy. It plans to invest in housing, railways, roads and airports.
The stimulus plan may help boost China's iron ore imports to between 400 million and 450 million tons, Daiwa's Lau said, beating Zou's forecasts.
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