Chinese steel makers should play an important role in the pricing of global iron ore, an official with the Department of Foreign Trade of the Ministry of Commerce said yesterday.

The official said China, as the largest iron ore importer, deserved "a bigger say" in the pricing for iron ore, and domestic companies should have more of a presence in this year's negotiation for iron ore prices.

China's import of iron ore stood at 275 million tons last year, accounting for 43 per cent of the global total ocean shipment.

However, Chinese mills and iron ore traders last year accepted a 71.5 per cent rise in iron ore prices, which was set by Japanese companies.

Shanghai Baosteel Group Corp, China's largest steel maker, is now in negotiations with three major suppliers, Australia's BHP Billiton Ltd, Rio Tinto Group, and Brazil's Companhia Vale do Rio Doce, to set iron ore prices for 2006.

Baosteel is the only representative of Chinese steel producers and iron ore traders in talks with major miners.

China was unlikely to see a demand for iron ore exceeding the supply this year, said the official.

According to the estimation of the China Iron & Steel Industry Association the country's crude steel production growth would slow to 10 per cent this year. The figure was 24.56 per cent in 2005.

The association predicted that China would demand 25 million tons more imported iron ore than last year.

"National policies for the development of steel industry encourage enterprises to wash out small-sized mills with low production capability this year, thus helping convert the supply-demand relationship of iron ore," he said.

The official also noted that the current stock of imported iron ore is increasing at a rapid speed.

There were about 33 million tons of iron ore at domestic harbours, 10 million tons at steel makers and 4 million in the hands of domestic miners, according to statistics from the ministry of communications and the Iron and Steel Industrial Association.

The high volume of stock is likely to bring current iron ore prices, which were already lower than the same period last year, to a lower level, the official said.

"Importers should think carefully about the fact so as to avoid potential risks," he warned.

According to statistics from the customs, China is diversifying its sources of iron ore. The country imported iron ore from 40 countries last year.

Australia and Brazil still supply more than half of China's annual import.

Some futures market analysts predicted iron ore prices might increase by 10 to 20 per cent more this year, but some argued Chinese companies could not afford an increase higher than 10 per cent.

Source: China Daily