Imports will account for close to 80% of China's iron ore requirements by 2016 as deteriorating ore quality makes more domestic supply uncompetitive in a lower price environment, China Hanking chief executive Guocheng Pan told an industry conference in Hong Kong.
Speaking at Mines & Money, Pan said China imported 818 million mt of iron ore in 2013, accounting for 72% of its needs, but this would rise to 77% by 2016.
He said China had significantly lifted its crude ore production over the past 10 years but investment in domestic mines was reaping fewer rewards.
China produced 1.45 billion mt of crude ore in 2013, a 17% increase over the past 10 years. However, concentrate production peaked in 2007 at 369 million mt (on a 62% Fe basis) and last year it fell to 315 million mt.
"It is striking that while crude ore increases sharply iron ore concentrate continues to drop. Chinese miners have invested heavily but unfortunately this has not brought greater iron ore concentrate volumes, mainly because of the decrease in ore quality," Pan said.
He cited China Iron & Steel Association data showing the average grade of domestic crude iron ore production had fallen to 21.5% Fe from 31% Fe a decade ago.
Much of the domestic output growth had come from small and medium-sized mining companies, which accounted for 83% of China's total iron ore production in 2013. These miners produced 1.1 billion mt of crude ore last year, while larger miners produced 224 million mt, or 17% of total output.
Over 2012-2013 it cost smaller and mid-sized miners between Yuan 200/mt ($32/mt) and Yuan 900/mt ($145/mt) to produce iron ore. The 26 largest Chinese iron ore miners were producing at an average cost of Yuan 457/mt ($74/mt), he said.
"This cost structure means many of these miners face a big challenge, and many could stop producing or merely survive when the iron ore price continues to drop in the next few years," he said.
China Hanking is a Hong Kong-listed mining company.
Speaking at the conference, Shaun Browne, chairman of consultancy AME Group, said China wanted to meet a 40% self-sufficiency target but with declining grades this was "unlikely to become a reality."
He said the average grade of new Chinese projects was between 5% and 15% Fe. "The better ones are above 30%," he said.
Last week, the Metallurgical Mines Association of China said it planned to lift the amount of ore sourced from local mines to 50% by 2025 from around 30% currently.