China likely to import 24% more ore in '07

China, the world's largest consumer of iron ore, might boost imports 24 per cent this year, as steel mills raise output faster than expected, Deutsche Bank said.

The nation, also the world's largest steel producer, might buy 403 million tonne of ore this year, up from 325 million tonne a year ago, analyst Tama Willis said in an April 13 report. The estimate is more than twice the 10 per cent gain forecast by the China Metallurgical Mining Enterprise Association.

China overtook Japan as the largest buyer of iron ore in 2003, as its economic expansion fuels the making of cars, buildings and appliances. Prices have risen to a record as Chinese mines cannot meet demand, leading to rising imports from Cia Vale do Rio Doce, Rio Tinto group and BHP Billiton.

"Chinese steel production continues to surprise on the upside,'' said Willis in the report. "With domestic Chinese iron ore production declining, we expect iron ore price risks to continue to be skewed to the upside.''

Chinese crude steel production could grow 17 per cent to 495 million tonne in 2007, and 13 per cent in 2008, Deutsche Bank predicts. Imports of iron ore could rise another 14 per cent in 2008 to 458 million tonne, the bank said.

China increased imports by 19 per cent last year, the Beijing-based customs office said in January.

"It is hard to conjure up a scenario where demand growth would ease back so suddenly, let alone fall, to cause a shift in fundamentals as to warrant a large market imbalance and consequent price falls in iron ore contract prices,'' the bank said.

Deutsche joins Credit Suisse in predicting that Chinese demand will keep contract iron ore prices at record levels for longer than expected. Credit Suisse said on April 13 that miners may enjoy all-time high prices till 2013, and predicts a 10 per cent gain in prices next year.

Cyclones in Australia, where BHP and Rio have their mines, India's export tax on iron ore, and rising steel prices would also strengthen the bargaining powers of miners during annual negotiations, Deutsche said.

The German bank on March 26 said it expected contract prices of iron ore to rise 10 per cent, instead of a 5 per cent decline.

Baoshan Iron & Steel Co, China's largest steelmaker, said in January it expected steel-product output to rise 10 per cent to 23 million tonne in 2007, and wanted to more than double that to at least 50 million tonne by 2012.

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ON A HIGH

China, the world's largest steel producer, might buy 403 million tonne of ore this year, up from 325 million tonne a year ago, analyst Tama Willis said in an April 13 report

China overtook Japan as the largest buyer of iron ore in 2003, as its economic expansion fuels the making of cars, buildings and appliances

Deutsche joins Credit Suisse in predicting that Chinese demand will keep contract iron ore prices at record levels for longer than expected

The German bank on March 26 said it expected contract prices of iron ore to rise 10 per cent, instead of a 5 per cent decline