Yao Yongbo, deputy manager of Hebei Iron and Steel Group International Trade Co. Ltd, the international trading subsidiary of major Chinese steelmaker Hebei Iron and Steel Group, has said that the monopoly in the iron ore trade and the new quarterly iron ore pricing system are causing the Chinese steel industry to register low profit margins or to incur losses. As a result, he said, restructurings and mergers in the Chinese steel industry are urgently needed.
Mr. Yao commented that there were too many small and private-owned companies in the Chinese steel industry. Consequently, in the iron ore price negotiations China was always in an inferior position, he said.
He suggested that China should develop large competitive steel groups. Three to five large steel groups with annual outputs of above 50 million mt each should be developed, while at the same time six to seven steelmakers with 10-30 million mt of annual output should be developed.
Mr. Yao added that this year Hebei Iron and Steel Group has taken over both Shijiazhuang Iron and Steel Corporation and Xuanhua Iron and Steel Group.
He also suggested reducing the number of companies with iron ore import qualifications, which could help to increase China's power of negotiation in iron ore talks.
Additionally, Mr. Yao said that Chinese investment in overseas mineral resources was scattered and was not systematic. This kind of investment is not efficient and therefore has not been able to break the monopoly situtation in the international iron ore market, he said.