China's iron ore imports fall for the first time since 1998

China's iron ore imports fall for the first time since 1998. China imported 618.6 million tonnes of iron ore in 2010, 8.99 million tonnes less than the 627.6 million tonnes in 2009, said the General Administration of Customs (GAC). This is the first year-on-year fall of the country's iron ore imports in a period of 12 years since 1998. Despite the reduction of imports by quantity, the country's steelmakers paid an additional 28.7 billion US dollars over the 2009 figure, which added the total amount of payment to 78.9 billion US dollars in 2010. Meanwhile, the profitability of the domestic iron and ore industry was plagued by the soaring iron ore costs, only averaging at 3.5 percent, much lower than the national average of 6 percent for all industrial sectors in the country. The China Iron and Steel Association (CISA) earlier forecasted that the full year profit of the industry in 2010 at 85 billion yuan only after prices of raw materials such as iron ore soared. Taking off the part of nearly 8 billion yuan gain from investment, the industry's net income generated from its main steel business in 2010 may arrive at only 77 billion yuan. The price of iron ore is very likely to go up further in 2011, predicted a senior industry source, pointing out that China's iron and steel industry will thus enter into an era of high cost, high price and low profit. Though the world's top three iron ore suppliers haven't finalized their quotation for the first quarter of 2011, market guess expects the prices of iron ore for the quarter to rise by 8 to 9 percent, meaning an immediate cost hike of 100 yuan/tonne for Chinese steel mills. The country's major steelmakers have raised their ex-factory prices for January one after another, owing to the mounting iron ore cost. Baosteel (600019.SH), the largest listed steelmaker in China, announced to raise its January ex-works prices of most steel products by 2 to 5.5 percent, or 100-300 yuan/tonne, earlier on December 14. Peer steelmakers, including Hebei Iron and Steel Group, Wuhan Iron and Steel Group and Angang Group, all joined in the tally to raise the ex-factory prices for January, tracking the mounting cost of iron ore for the first quarter of 2011. However, the country's enthusiasm in iron ore consumption is not likely to let up in the year to come, as the industry will further release more production capacity and keep up a strong demand on the raw material.