China iron ore demand to rise by 50m tons in 2013
Author:Network sources Source:Network sources Date:2013-03-29

China's iron ore demand is expected to rise by 50 million tons in 2013, but it will not be enough to soak up a supply glut on the world market, the country's top economic planning agency said Monday.

China's own iron ore supply will rise by 20 million tons and the world's top three miners are expected to raise capacity by a combined 100 million tons this year, the National Development and Reform Commission said on its website.

The excess supply is likely to pressure iron ore prices that have already fallen 15 percent from this year's peak amid slower steel demand in China, the world's biggest consumer and producer of the construction material.

Global miners Vale of Brazil and Australia's BHP Billiton and Rio Tinto have banked on sustained increases in iron ore demand from China to justify massive expansion plans.

China imported a record 743.55 million tons of iron ore in 2012, up 8.4 percent on the year, but total steel output rose just 3.1 percent to 716.5 million tons, in step with a slower economy.

The influential planning agency forecasts a 30 million ton increase in China's crude steel production this year, but said the increase in steel demand from China and elsewhere was not likely to be enough to absorb the big increases in iron ore supplies at home and abroad over 2013.

"Looking at the trends, oversupply in iron ore is unavoidable," it said.

The industry forecasts total global supplies to rise around 300 million tons from this year through 2015, the agency noted.

Rio Tinto and BHP Billiton last week warned of volatile markets and softer iron ore prices as they stick to expansion plans while China's steel production growth slows.

Investment bank Goldman Sachs cut its iron ore price forecasts because of the supply surplus and slower Chinese steel output, expecting iron ore to average $80 a ton by 2015.

Iron ore stood at $135.30 per ton on Friday, having peaked at $158.90 last month.

Iron ore demand was also likely to be dragged down by low economic growth in developed countries, and there was little room for big steel production increases in developing countries such as India, the planning agency said.

However, it said the "concentration" in the iron ore market would allow the big global miners to delay projects and suppress output to regulate supplies, and it would take some time before the glut was fully reflected in the market.


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