RENO To fight recent and future iron ore price hikes, Chinese officials have ended the export tax rebate policies that encouraged the export of billet and steel.
During an executive meeting of China’s State Council last week, Premier Jen Wiabao emphasized the need for strict control of China’s economy and improving the country’s industry structure to cope with the rising cost of iron ore. As a result, the State Council called for an end to tax rebates on crude steel product exports.
China is the world’s largest iron-ore importer with more than 50% of the iron ore used in China coming from imports. The communist party’s official mouthpieces, The People’s Daily reported Sunday that iron ore imports were 208 million tons in 2004, up 40.5% over 2003. This year iron ore imports are expected to rise as much as 19% to meet the demand for housing and other construction, automobiles and refrigerators. The State Information Center estimated that the cost of China’s whole steel industry will increase by at least 2.4 billion to 6 billion this year, or by 20-30% of the industry’s 2004 profits, according to The People’s Daily.
Sixteen major Chinese steelmakers have formed a iron ore import sub-commission to fight proposed iron ore price increases by Australia’s BHP Billiton. Brazil’s CVRD and London’s Rio Tinto have already hiked iron ore prices 71.5%. BHP has asked for $10 per ton, a $7.50 increase. CVRD, Rio Tinton and BHP control up to 80% of the world’s seaborne iron ore trade. BHP has justified its request price increase on the reasoning it is cheaper to ship iron ore from Australia to China than from Brazil to China. BHP Chief Executive Chip Goodyear contends that the landed cost of Australian iron ore is $20 per ton cheaper.