China seeks to influence the formation of the price of iron ore

China is looking to create giant mining groups to play a more active role in iron ore price negotiations with rivals around the world. The country plans to create a large mining conglomerate with a focus on iron ore mining and smelting operations based on the state-owned metallurgical producer Ansteel Group in Liaoning.

Ansteel will acquire a number of mining operations and plans to carry out integration work in the coming years to ultimately achieve an annual production capacity of 200 million tonnes of iron ore by 2025. At the same time, eight large mining groups will also be created and integrated throughout China. The production capacity of each group will exceed 30 million tons of iron ore per year in ten years.

China is the world's fourth largest iron ore producer with over 70 billion tons of resources. But the country's dependence on foreign iron ore rose 70 percent last year. To optimize the resources of domestic companies, a plan has been developed for the restructuring of the iron ore sector in China for the period from 2016 to 2025.

The fact is that the quality of raw materials provided by domestic miners is much worse compared to the same products shipped from Australia or Brazil, but the prices of their raw materials are twice as high as those of Chinese iron ore. The three largest miners in the world BHP Billiton, Rio Tinto Plc and Vale SA are the main import sources of iron ore for China.

A professor at the China University of Mining believes that if the situation with iron ore in China is not changed, Australian and Brazilian producers are likely to set their prices in the range of 120-125 AUD /ton this year. As a result, China will buy more iron ore from large international sellers and produce less iron ore in its own market.