Australian iron ore miners boosted by growing Chinese demand: experts

Updated 2017-02-01 11:46:15 Xinhua

Australian ore miners are expecting an export boon, as China continues with its efforts to shut down outdated and inefficient steel mills throughout the nation, with some predicting on Wednesday, demand will soar by at least 40 million tons per year.

In 2016, China began to shut down steel plants with a total capacity of over 90 million tons, with plans to shut down additional plants, reducing capacity by a further 100 to 150 million tons by 2020.

"A proportion of China's steel mills do not meet environmental standards and should be shut down," Ma Guoqiang, chairman of Wuhan Iron and Steel, told Xinhua in 2016.

The strategy has been welcomed by Australian mining companies, with the new, efficient furnaces set to be built in China, relying on iron ore and coal to operate, with Australia looking to meet the demand.

David Liu, director of Sales and Marketing at Fortescue Metals, told the Australian Financial Review that the shutting of the older Chinese steel mills were an "enormous bonus" to iron ore producers in Australia, and is hopeful that the Australian market can meet the expected "40 to 60 million tons" of demand to be satisfied.

"So we will see a lot of replacement done by the integrated steel mills, which will use mostly imported ores to produce steel," Liu said.

Not all agree however, with J-Capital managing partner Tim Murray saying in a note, that Chinese demand for iron ore will fall by 30 to 40 million tons per year.

If correct, this would severely impact Australia as the world's largest iron ore exporter, and in particular, the Western Australian economy, which holds 90 percent of Australia's iron ore resources.

China's National Development and Reform Commission said in November that the steel industry in China had completed its annual target of reducing production capacity.

The benchmark iron ore price is currently sitting at 82.43 U.S. dollars per ton at 9:31 local time.

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