In 2000, China's dependence on imported iron ore was just 34.46 percent; in other words, imported iron ore accounted for only 34.46 percent of China's total iron ore consumption in that year. However, the figure increased to 53.82 percent in 2006. Regarding the iron ore consumption of integrated steel mills with large capacities, imported ore has started to account for over 90 percent of their total iron ore consumption. The continuous upward trend in international iron ore prices has in the last few years pushed Chinese steelmakers to seek rich and high quality iron ore reserves around the world. However, as the global iron ore market is mostly dominated by a few major companies, China's steelmakers have only been able to lay their hands on a small share.
To date Chinese steelmakers have managed to obtain 43 million tons of annual overseas iron ore production capacity. Considering that China imports around 300 million metric tons of iron ore per year, Chinese mills' share in that figure is only around 14 percent - undoubtedly a very low level. In Japan, on the contrary, nearly 45 percent of the country's iron ore imports are supplied by mines controlled by Japanese steelmakers.
Currently, China's overseas iron mines are mainly located in Australia, South America and Southeast Asia. Of these, Australia accounts for about 55-65 percent of the total iron ore production capacity.
Since 2004, China's degree of dependency on imported iron ore has been over 50 percent. With the increase in the quantities of imported iron ore, both iron ore price hikes and rising shipping costs have been putting greater pressure on the Chinese steelmakers.
Coming up to 2001, China's steel market was on the eve of it boom period and overseas iron ore suppliers were bothered by the problem of how to sell their large iron ore quantities. It is a cause of regret for Chinese steelmakers that at that time they neglected many opportunities of foreign direct investment (FDI) in overseas iron ore mines. Back then, any cooperation with Chinese steelmakers would have been greatly welcomed by the iron ore miners. However, lacking long-term vision, Chinese steelmakers preferred to choose cheap spot transactions rather than conclude any long-term cooperation agreement under fixed prices with the ore suppliers, not to mention FDI. As a result, they now find themselves in their current difficult situation.
Nevertheless, some optimistic forecasts indicate that a global iron ore surplus may be seen in three-to-five years' time. In this eventuality, Chinese mills may have the opportunity to make progress as regards their overseas investments in iron ore mines.