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Iron ore eats profits of Chinese steel makers

Indexes for steel varieties have seen sharp decline since the New Year began,
particularly cold rolled and longs materials. There are many things to blame for
the sluggish market and iron ore monopoly is certainly one of them.

For
2011, Rio Tinto Group, BHP and Vale posted a net profit of USD 5.8 billion, USD
23.065 and USD 22.885 billion respectively, 3.7 folds of the profit of CNY 87.5
billion reported by 77 large and medium sized steel mills in China.

The
alternative sources which China considers as a break down to iron ore monopoly
are successively raising export tariffs. Even the stable supplier, Australia
which fed 43% of Chinese iron ore consumption in 2011 seems like an unexploded
bomber after they passed 30% Australian Resources Tax which is to be effective
from July 1st 2012.

Mr Xu Shaoshi minister of the ministry of Land and
Resources said that China is facing threat to the country’s resources safety as
China’s dependency rate of iron ore surpasses 50%. To jump out of the boundary,
China launched own index and spot trading platform, encourages oversea
investment in mining, ports and define it as a strategic mineral but it seems
there’s still a long way to go. China’s demand for mineral resources will peak
in 2025 to 2035 and then steadily fall down later on

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