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By Wu Jiao (China Daily)
Updated: 2008-02-28 10:18

The search for domestic reserves of iron ore will be accelerated in the wake of soaring global prices, a senior official said Wednesday.

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"We will launch a new round of our nationwide iron ore survey, focusing on the vast central and western areas of the country in a bid to boost supplies," Wang Min, vice-minister of land and resources, said at a meeting yesterday in Tianjin.

The meeting, to discuss the direction of iron ore surveys, was held following the announcement of substantial increases in the cost of imports of the commodity into the country.

As the world's largest steel-maker, China is also its leading consumer of iron ore, a major constituent of steel.

Wang said that in the 1990s, geological prospecting teams almost stopped looking for new mines, as known reserves were "sufficient to last 300 years, based on demand levels at that time".

"But the forecasts did not account for the country's rapid economic growth, and now our supplies are dwindling," Wang said.

He said that while the country has abundant reserves of iron - with about 60 billion tons already discovered and 100 billion tons predicted to be found - high-grade ore was still relatively scarce.

According to the China Iron and Steel Association, the global sea-borne trade in iron ore was 805 million tons last year, of which 383 million tons were shipped to China, up 17 percent on 2006.

But with global giants, such as Australia's BHP Billiton and Rio Tinto, and Brazil's Companhia Vale do Rio Doce (CVRD), controlling 72 percent of the world iron ore trade, China's steel industry has come under enormous pressure on prices.

CVRD and Baosteel Group, China's largest steel-maker and the country's representative in negotiations with the iron ore giants, on Friday agreed to price increases of between 65 and 71 percent.

Price hikes aside, demand for iron ore by steel-makers is set to grow by 26 percent a year until 2010, Wang Jionghui, an official with China Minmetals Corp, the largest Chinese metals and minerals producer, said.

Chinese firms must adopt new models for obtaining resources, including becoming shareholders of global minerals giants, he said.

Increases in the cost of iron ore have had a predictable effect on steel prices. The China Securities Journal reported on Monday that 57 domestic steel plants had raised their prices after the price agreement was reached.