This year, the iron ore market staged a roller coaster market. In May, the price of imported iron ore climbed to an all-time high of US $233 per ton, but recently fluctuated around us $90 per ton, with a decline of more than 60%.
"Although the current iron ore price has fallen sharply due to the rapid reduction of China's demand in the short term, the upstream centralized monopoly pattern has not changed, and the iron ore pricing mechanism has not changed. The insufficient guarantee capacity of iron ore resources is still a problem affecting the stable operation and development of the industry for a long time." Luo Tiejun, vice president of China Iron and Steel Industry Association, said recently that only by truly changing the composition of iron ore resource sources can we fundamentally solve the problem of resource shortage in China's iron and steel industry chain and take the initiative in ensuring iron and steel resources in our own hands.
Expand domestic iron ore development
China is the world's largest producer and consumer of steel. Since 2015, the external dependence of iron ore has been above 80%.
China's iron ore reserves rank among the top in the world, but the per capita resources are only 25% of the world average, and there are some problems such as poor iron ore resource endowment, low grade, small scale and high production cost. The situation of "external increase and internal decrease" of iron ore supply is prominent. From 2010 to 2020, domestic iron ore production decreased by 19.1%; The amount of imported iron ore is increasing year by year, reaching 1.17 billion tons in 2020, a record high.
Under the background of accelerating the construction of a new development pattern, it is necessary to strengthen the development of domestic iron ore resources to maintain industrial security. At the 2021 (10th) high-end forum on China's iron and steel raw material market recently held by the metallurgical industry planning and Research Institute, Ju Jianhua, director of the Department of mineral resources protection and supervision of the Ministry of natural resources, pointed out that during the 14th Five Year Plan period, it is necessary to speed up the construction of 25 iron ore resource bases and the exploration and development of 28 national planned mining areas, so as to build a supply pattern dominated by large and medium-sized mines. Ensure the steady improvement of the existing iron ore supply capacity, actively promote a number of iron ore construction projects with guaranteed resources, location advantages and industrial foundation, ensure reasonable demand for ore and land, add a batch of high-quality production capacity, and stabilize the annual iron ore supply at about 300 million tons (grade 62%).
According to Jiang Shengcai, Secretary General of China Metallurgical and mining enterprises association, there is still great potential for the development and utilization of domestic iron ore resources, but some restrictions need to be broken through. From January to September this year, fixed asset investment in domestic iron ore mining and dressing industry increased by 25% and private investment increased by 24%, but the investment intensity is still at a historical low. Policy constraints and complex licensing procedures are the main factors, resulting in the slow construction of new large-scale mine projects, and the progress of investment continuation projects and mine technical transformation projects is not ideal.
Relevant departments have released the policy signal of "continuing to increase support for domestic iron ore development". Recently, Xia Nong, a first-class inspector of the industry department of the national development and Reform Commission, led a team to Baosteel Resources Co., Ltd. for investigation, he said that he would study and establish a departmental coordination mechanism, break through the policy blocking points in domestic iron ore development, continuously improve China's independent guarantee ability of iron ore, and maintain the safety of China's iron and steel industry chain and supply chain.
Enhancing cost competitiveness is also a compulsory course for domestic iron ore enterprises. Jiang Shengcai analyzed that compared with the arrival cost of domestic and imported mines, domestic mines can operate normally as long as the average CIF price of imported mines is no less than US $60 per ton. In the face of fluctuations in ore prices, domestic mines should strengthen their foundation, practice their internal skills, and do everything possible to enhance their ability to prevent risks. "Through intelligent and green upgrading and transformation, resource integration and comprehensive management, domestic mines can support the important task of ensuring the safety of China's iron ore resources with lower cost, higher efficiency and better quality." Jiang Shengcai said.
Strengthening scrap steel recycling
Scrap steel is the only high-quality raw material for steel production that can gradually replace iron ore. In China, the steel process structure has always been dominated by long process, and the output of short process EAF steel with scrap as the main raw material accounts for only 10.4% (2020), which is still a large gap compared with the world average of about 30%.
The action plan for carbon peak before 2030 issued by the State Council clearly proposes to improve the recycling level of scrap resources and promote the all scrap electric furnace process.
"Waste steel resources are important strategic resources, and the state has raised them to the level of steel raw material safety." Li Shubin, director of the expert committee of China scrap iron and Steel Application Association, analyzed that if China's iron and steel industry wants to truly achieve ultra-low emission and green development, achieve the dual carbon goal, use more scrap steel and less iron ore, expand short processes and reduce long processes is one of the important paths.
Iron ore is a primary resource and scrap steel is a renewable resource. Compared with steelmaking with iron ore, steelmaking with scrap steel can reduce 1.6 tons of carbon dioxide emission, save 350 kg of standard coal, use less 1.7 tons of concentrate powder, and greatly reduce the emission of waste gas, waste water and solid waste, which has significant environmental benefits.
Data show that in 2020, China's iron and steel reserves will reach 11.4 billion tons and the supply of scrap steel will be about 260 million tons. Over the same period, the scrap consumption of China's iron and steel enterprises reached 230 million tons, a year-on-year increase of 6.5%.
In order to promote the effective utilization of foreign recycled steel raw materials, the national standard of recycled steel raw materials has been officially implemented in early 2021. Customs data show that from January to September this year, China imported 489900 tons of scrap steel, an increase of 17.1 times over the same period last year.
"In the next five to 15 years, China's output of scrap resources will gradually enter the fast lane, and the share of scrap replacing iron ore will show an overall growth trend." Li Xinchuang, Secretary of the Party committee and chief engineer of the metallurgical industry planning and Research Institute, pointed out that with the continuous and rapid growth of China's social iron and steel reserves, the output of scrap resources will further increase. Coupled with the liberalization of the import of recycled iron and steel raw materials, the total supply of scrap resources in China is expected to reach 340 million tons in 2025. The proportion of EAF steel output in the total crude steel output in China will be increased to 15% to 20%.
Accelerate the development of overseas equity mines
Luo Tiejun proposed that the iron and steel industry should strive to achieve the goal of "increasing by two and six percentage points" during the 14th Five Year Plan period. Specifically, during the "14th five year plan" period, the domestic iron concentrate output will increase from the current 270 million tons to 370 million tons, and the resource guarantee will increase from 15% to 21%; By the end of the 14th five year plan, the amount of scrap steel will increase from 230 million tons to 300 million tons, and the contribution rate of crude steel from scrap steel will increase from 20% to 26%. Thus, the dependence on imported ore can be greatly reduced.
It must be pointed out that due to the huge demand for iron ore in China, the large use of overseas iron ore is still a long-term strategy. According to the Research Report of the metallurgical industry planning and Research Institute, considering the abnormal growth of domestic steel production, the continuous tightening of environmental protection, the gradual consideration of carbon emission costs and the trend of scrap substitution, it is expected that the imported ore volume will remain above 1 billion tons during the 14th five year plan period.
From the current situation, China's imported iron ore accounts for more than 70% of the world's trade volume, but it seriously lacks the voice of pricing. This is mainly because the international iron ore trade has formed a seller monopoly. At the same time, China's iron and steel industry has some weaknesses, such as insufficient control of iron ore resources, low proportion of equity ore, high concentration of import sources and so on.
"It is the only way to strengthen the development of overseas resources." Chen Ziqi, Deputy Secretary General of the expert academic committee of China International Engineering Consulting Co., Ltd., said that in 2020, China's equity mines accounted for only about 8% of the imported mines (more than 60% in Japan), which obviously lacked control over overseas iron ore resources, and more than 80% of the imports came from Australia and Brazil, highlighting the risk of resource guarantee.
According to the objectives set forth in the guidance on promoting the high-quality development of the iron and steel industry (Draft for comments) issued by the Ministry of industry and information technology, strive to build one to two overseas equity iron mines with global influence and market competitiveness by 2025, and the proportion of overseas equity iron mines in imported ores exceeds 20%.
However, the difficulty of developing overseas mineral resources should not be underestimated. According to Chen Ziqi's analysis, the world's proven high-quality iron ore resources are almost divided up by enterprises in developed countries. What is left to Chinese enterprises are only projects with low exploration level, poor resource conditions, large investment scale, long return cycle, backward infrastructure and high risk. At the same time, with the increasingly fierce international competition, Chinese enterprises generally have problems such as low internationalization level and unfamiliar with the situation of the host country, which is easy to lead to acclimatization and even project failure.
"The difficulty determines the difficulty and long-term nature of overseas resource development." Chen Ziqi said that at the national level, we should continue to support all kinds of enterprises to develop resources overseas. At the enterprise and project level, we should be steady, act according to objective laws, and avoid being too hasty or superficial.
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