China's iron ore demand is expected to stay flat, said an official from Baoshan Iron & Steel Co, the country's biggest listed steelmaker, as Beijing's stricter environmental rules boost the use of scrap steel. China's growing stockpiles of scrap steel should also increase its use in steelmaking versus iron ore, Ji Chao, an assistant to the president of Baoshan, told an industry conference organised by the China Iron and Steel Association on Thursday.
"After years of strong growth, pig iron output in China has reached a peak level and entered into a flat zone. Accordingly, iron ore demand will stay flat," said Ji. Mills combine iron ore with scrap steel to make pig iron as part of the steelmaking process, but the country's proportion of scrap steel has been rising as China intensifies a campaign to limit pollution.
The world's top iron ore importer, China bought a record 1.08 billion tonnes of the steelmaking raw ingredient last year, the second successive year in which purchases crossed the 1-billion mark. As China adopts tougher environmental rules and stockpiles of steel scrap grow, output from electric-arc furnaces, smaller-scale mills that use only scrap as a raw material, is expected to rise, Ji said.
China's iron ore demand will gradually drop with steel demand similarly having peaked, said Jia Dashan, a vice president at the China Waterborne Transport Research Institute, a think tank for Transport ministry, on the sidelines of the conference. "Domestic steel consumption is stable whereas steel exports are decreasing," he said.
"That is why we keep saying current berths at ports are enough to meet imported iron ore demand and there is no need to build more berths." But Fortescue Metals Group, the world's No. 4 iron ore miner that ships bulk of its output to China, believes Chinese steel production will continue to grow.
"People have called the peak on a number of occasions and we've seen continued growth. I think it is fair to say that we expect steel production to probably stabilise around current levels," Fortescue Chief Executive Elizabeth Gaines told Reuters. "I do think the outlook for the Chinese economy remains strong and that will also be underpinned by the Belt and Road Initiative which will continue to drive demand for steel and therefore for iron ore," she said.
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