China is expecting an increase in iron ore production both at home and abroad and a slowdown in its domestic consumption in 2006, the National Development and Reform Commission (NDRC)has said.

With technical breakthroughs in the development of low-grade mines and operation of several new mines, China's iron ore production will rise to 540 million tons in 2006, NDRC said in a report made available to Xinhua on Friday.

The production will be 120 million tons more than that of 2005 and will reduce imports by 60 million tons, the report said.

NDRC statistics show that the country actually produced 54.7 million tons of iron ore in the first two months, up 26.4 percent on the previous year.

Production in February hit 29.5 million tons, surging by 36.8 percent.

The NDRC report said global iron ore production is also likely to rise significantly, as investments by major suppliers in recent years will bear fruit in 2006.

New capacity from BHP and four other major Australian mines alone will amount to 70 million tons, the report said, quoting figures provided by the Australian side during bilateral talks on resources.

As supply increases, China's demand is slowing down. The report estimates that China will need 558 million tons of iron ore in 2006 to produce 360 million tons of pig iron.

This would mean an increase of 45.88 million tons in its iron ore demand, or an 8.98 percent increase.

Based on the level in February, when the country produced 1.01 million tons of pig iron, the report estimates that China's pig iron production will be around 369 million tons. That would demand 572 million tons of iron ore, a rise of 59.83 million tons over that of 2005.

This is a much weaker increase compared to 2005 and 2004, when its consumption increased by 121.76 million tons and 75.85 million tons, respectively.

The NDRC report estimates that China's demand will be further reduced by 60 million tons in 2006 as it continues phasing out backward capacity. The target for this year is to phase out 43 million tons in pig iron capacity.

Source: Xinhua