At the end of December, two of
China's biggest industrial associations,
China Iron & Steel Association (CISA) and
China Chamber of Commerce of Metals Minerals & Chemicals Importers & Exporters (CCCMC), jointly issued two sets of important industrial regulations regarding
China's
iron ore import sector. The new regulations mean that
China's current
iron ore import system is destined to undergo a thorough change in the very near future.
The two regulatory documents in question are entitled, “
Iron ore importers' qualification criteria in 2007” and “Opinions regarding the boosting of the
iron ore importing agent system.” The regulations aim at improving the admittance level of
iron ore importers and at perfecting
China's
iron ore import market. Both sets of regulations will enter into effect on February 1st, 2007, prior to which there will be a trial period starting from January 10th. The regulations in question are detailed under the two main headings below:
Strict qualification criteria for iron ore importers
These criteria may be divided into three areas: basic standards, operating competence and environmental protection.
– Basic standards
The importer will have to have a registered capital of at least RMB 20 million ($ 256 million) and will also need an ISO certificate. Furthermore, the importer's bank credit rank should be AA at least, with a credit value worth RMB 400 million ($ 51.2 million).
– Operating competence
The importer's annual output of crude steel should be at least one million metric tons; the
iron ore import volume should be 700,000 metric tons or above; the comprehensive energy
consumption per ton of steel should be less than 741.05 kg of standard coal; new water
consumption per ton of steel should be less than 8.03 ton or not more than the average industrial level by 20 percent; in addition, the importer will have to meet certain warehousing capacity requirements.
– Environmental protection
The importer's processing of polluted water will have to conform to
China's national standard GBl3456—92; the air pollution index will have to be less than 9.81 percent of the average industrial level in 2005, or not more than 12 percent of it. Moreover, if the importer has blast furnaces of 300 cubic meters or less, it will to draw up a schedule for the closure of such outdated facilities and subsequently perform the closure.
Due to the stricter qualification criteria mentioned above, it is estimated that the number of
iron ore importers will not exceed 90 for the 2007 fiscal year, dropping down from the current figure of 118 importers (70 steelmakers and 48
trading companies).
Iron ore importing agent system
Qualified
iron ore importers can be divided into two groups - the steelmakers and the traders. Besides importing for themselves, the steelmakers may also act as import agents for other local steel mills without importing licenses. The traders may only act as import agents for local buyers. As agents, the importers are not allowed to make profits from price margins. Instead, their income will come only from agent commissions. Moreover, the
iron ore importer's importing license will be cancelled if it sells the ore to mills with outdated capacity which the state wants to close down.
The publication of the two documents in question also represents a move by the state to bring order to the domestic
iron ore market through the relevant industry associations. Since both all steelmaker and trader importers of
iron ore will have to be members of the CISA or CCCMC respectively, these associations will be able to maintain more effective order in the market. An additional advantage is that the closing-down process of outdated capacities will be accelerated by the difficulties outdated facilities will have in getting their hands on
iron ore supplies.