China witnesses iron ore import slowdown

China witnesses iron ore import slowdown

Iron ore imports to China began to decline soon after the new import licensing system took effect on March 1, 2005. Beijing introduced the licensing system in an effort to curb “blind imports” of iron ore into China. A slowdown in iron ore shipments over the last three weeks to the world's largest importer of iron ore seems to be a testament to the effectiveness of the new system. Reportedly, the licensing system has not impacted major importers of iron ore to China; however, minor traders are definitely feeling the pressure due to tightened government control on low-grade iron ore. Prior to the introduction of the licensing system, China's ports were plagued by congestion because importers would snap up iron ore off the spot market, regardless of whether or not there were customers in the Chinese market. While the Chinese ports still show high inventories of iron ore, traffic into the ports began to ease during March. The slowdown in iron ore imports mostly affects Indian iron ore producers because their ore is sold on the spot market in China, while ore from Brazil and Australia is sold on fixed contracts.