Kalgoorlie, Western Australia — MININGREVIEW.COM — 05 August 2009 – BHP Billiton Limited “’ the world’s largest mining company “’ says that Chinese iron ore imports are increasing as steel production rapidly recovers, mainly due to the government’s stimulus package.
“In China in particular we expect steel demand growth will continue,” said Ian Ashby, president of Melbourne-based BHP’s iron ore unit, here in a presentation to the Diggers and Dealers conference. “We can see seaborne iron ore demand increasing 2.5 times globally by 2025,” Ashby added.
The price of iron ore for immediate delivery to China has jumped 38% this year as the country’s US$586 billion (R4 600 billion) stimulus plan spurs mills to secure supplies to meet demand for automobiles and buildings. BHP “’ pushing for an end to the annual contract system “’ is selling more ore on the cash market, after prices soared 33% this year.
Bloomberg News quotes Australian exporter Grange Resources Limited as saying that China’s iron ore imports were “massive” in the first three to four months of the year. Iron ore imports into major Chinese ports in July rose 35 % from a year earlier to 56.5 million metric tonnes, according to the Ministry of Transport.
“The benchmark pricing system is unsustainable and does not determine the true price of iron ore,” Ashby said. “The price of ore for immediate delivery to China, the biggest buyer of the steelmaking material, is now 25% above the benchmark agreed between Australian producers and mills in Japan, Korea and Taiwan,” he added. “Chinese mills haven’t accepted the benchmark.”
BHP last week agreed to sell 30% of its iron ore under new pricing mechanisms, signaling a break with the 40- year-old tradition of settling annual contracts in Asia. The ore will be sold through a mix of cash, quarterly and indexed pricing.