China, the world's largest iron ore importer and consumer, is set to abandon its old policy of a licensing system for importers from next month, in line with Premier Li Keqiang's policy reducing governmental interference in the market.
Starting from July 1, companies can apply for iron ore and alumina oxide importing licenses online, in an effort to promote free trade and provide a more convenient procedure, it said.
The new policy is in line with Premier Li Keqiang's recent statement that China will work on reducing governmental interference in the market and simplify approval procedures in many sectors, state-run China Daily reported.
China is the world's largest iron ore importer and consumer with annual consumption of more than one billion tonnes. Up to 60 per cent of iron ore traded globally comes to China.
Currently, the China Iron and Steel Association and the China Chamber of Commerce of Metals Minerals and Chemicals Importers and Exporters are responsible for regulating iron ore trading on behalf of the Ministry of Commerce, and issuing licenses to importers.
But industrial insiders now believe traders will not require their approval for iron ore imports in future.
The move by the Chinese government will provide fairer access to foreign iron ore resources by middle and small-scale steel companies, which currently have to pay commission fees to middlemen who have importing rights for the raw material, an official told the daily.
He said the commerce ministry's announcement to change its license approval system is just the first step and the need for importing rights, as well as the license, will be removed.
Data shows that there are currently 118 steel companies and traders in China that have the right to import iron ore.
Large metal and steel producers such as Baosteel Group, Ansteel Group, Shougang Group and China Minmetals Co are included in the list.
A small number of traders with importing rights charge a commission fee of between 0.3 yuan (USD 0.05) and 0.5 yuan per ton to help other companies import iron ore. This results in more than 10 million yuan in profits annually, an official told the Daily "Their businesses will be affected by the new rule," he said.
"However, it will be really beneficial for medium and small-scale steel companies and traders. And foreign iron ore giants such as Rio Tinto, BHP and Vale will also have increased business as a result, " he said.
The move was aimed opening up the market further, which will bring more business opportunities to foreign producers and traders, official media here reported.
Iron ore from India, traditionally been the top item to be exported to China, has dropped by 14 per cent to USD 9.6 billion in 2011 compared to the USD 11.2 billion in 2010. The ore exports dropped further to 46 million tonnes in the first nine months of last year, registering a fall of 304 per cent.
Over the past year, China imported a record 743 million metric tons of iron ore, showing an annual rise of 8 per cent.
However, China's steel companies recorded total profits of just 1.58 billion yuan, a 98 per cent fall year-on-year.
Experts say the reason for the industry's decline has been a combination of overcapacity, a gloomy economy and weak demand, but most notably, soaring iron ore prices.
