Increase in steel production has led to the steady increase of the price of iron ore in China. The Steel Index revealed that since the last closure session at US$52.90 a tonne, the price of iron ore jumped 1.7 percent to US$53.80 tonne in the latest session. Earlier this month, the price of iron ore hit the lowest in 10 years at US$46.70. The current price soar reflects 15 percent increase to the lowest recorded mark.
The price recovery is a result of the Chinese government’s persistent efforts to revive the slowing economy along with rising oil prices. The price hike comes at a time when BHP Billiton has decided to slightly slow down its planned expansion. The world’s biggest miner by value, BHP Billiton along with one of its rivals Rio Tinto, has however forecasted that the steel production in China will reach to 1 billion tonne in the next 10 years. The future iron ore demand will be reflected through the volume of steel production in China. Though the mining companies are highly positive about the steel demand in the coming years, the World Steel Association has estimated that the steel demand in China may have already reached the highest. Clinton Dines, the former head of BHP’s China Business asserted the same about the steel industry in China.
This has not deterred the Japanese conglomerate, Mitsui to restrict its expansion in China. The company has mentioned that the current urbanization in the country will fuel the demand for steel in making the infrastructure and this will drive the demand from the steel industry. If the steel industry further grows, it will absorb as much as 300 million tonnes of iron in the next few years.