China urges steel makers to reduce stockpiles of iron ore

Wed 21 May 2008

CHINESE steel makers, the world's biggest buyers of iron ore, should reduce stockpiles of the raw material because they give a "false impression" of rising demand, the China Iron and Steel Association (CISA) said.

Mills should only store iron ore at ports to meet 45 days of usage, the association, funded by the nation's biggest steel makers, said on its website.

Companies that import and keep iron ore to sell later for higher prices would be deprived of import licences, it said.

Rio Tinto and BHP Billiton, which account for half of Asia's iron ore sales, are pointing to rising Chinese imports of the material to ask more for their products.

Chinese companies held a record 79.2 million tonnes of iron ore at ports, CISA said yesterday. "The high stockpiles delayed loading of new shipments and hampered cash flow.

"It also gave a false impression that China's demand is rising sharply."

The country imported 383.1 million tonnes of ore last year.

China's iron ore imports rose 15 per cent in the first four months from a year earlier, outpacing the 8.3 per cent increase in blast-furnace output, the association said.

Iron ore is fed into blast furnaces and then further processed into steel.

Chinese steel makers have agreed to pay Brazil's Vale do Rio Doce, the world's largest exporter of iron ore, as much as 71 per cent more for the raw material this year. Rio and BHP want a higher price than that.

Source Bloomberg

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