Despite the slowdown in its steel industry, China is consolidating its position as the leading importer of iron ore and relies on Australia for half of its purchases. The Chinese steel industry will produce 799Mt of crude steel products in 2014, from 775 Mt in 2013, according to Tom Price from UBS.
Its growth rate is strongly decelerating from 9.3% year on year in 2013 to 3.1% this year. Based on production costs and supply sources, Tom Price believes that steelmakers will get 842 Mt of imported iron ore (57.5% iron content), 371 Mt of locally mined ore and 98 Mt of recycled iron.
These 799 Mt of crude steel products will require 488 Mt of metallurgical coal or pulverized coal, 4% more than last year. Much of this coal is mined in China but imports accounted for 75 Mt or 16% of Chinese consumption in 2013. For 2014, the Swiss bank expects a decrease to 65 Mt or 13% of total consumption.
The Chinese steel industry production in 2014 will almost provide half of global production (48.1%). China is expected to consume 53% of the iron ore extracted and buy 62% of seaborne ore (iron ore exported by sea). Its leadership position in the iron ore market is the consequence of the relatively small amount of iron scrap used in Chinese steel production. If the use of scrap in 2014, expected to be 98 Mt, was to increase by 50%, imported iron ore would decrease by 10% and coking coal by 7%. For 2014, UBS expects global steel production to be 1,662 Mt, resulting in an iron ore demand of 2,073 Mt.