Low prices could have closed half of China's iron ore mines

With global prices of iron ore falling to a five-month low in April, the Chinese steel industry, the world's biggest consumers of iron ore, has bought a record quantity of the mineral on the spot market last month, leading to the closure of nearly half of China's iron ore mines.

Speaking at an economic conference organised by the Australian investment bank Macquarie Group in Hong Kong yesterday, Anthony Loo, Rio Tinto's managing director for China, said, "We believe that perhaps up to half of domestic iron ore mines are currently shuttered as imports - lower cost producers around the world - have displaced domestic production."

Since iron ore prices had risen by nearly 400 per cent during the past five years, many small iron ore mines opened up in China. However, since the latter part of last year, prices have come crashing due to global economic slowdown, which has affected the steel industry and forced nearly all these small mines to shut. 

Chinese steel industry, which imported a record 57 million tonnes of iron ore in April, an all-time high, up 9 per cent from March and up 33 per cent compared to last April, had said that they it buy more iron ore in the world spot market in order to push the prices of iron ore down even further.

Iron stocks at China's two largest iron ore ports in Qingdao has neared to its maximum capacity, while in Rizhao, the stocks were up 300,000 tonnes.

The northern province of Hebei, which has hundreds of private, small steel mills, have built up inventory of iron ore to gear up for more production since their low operating costs have yielded more profits.