Iron ore demand seen climbing, but not prices

China's 2013 demand for iron ore, a major material used in steel production, is expected to jump by 5.7 percent year-on-year to 1.11 billion tons, according to China Iron and Steel Association (CISA) Wednesday.

"In fact, we estimate that this year China's demand for iron ore may even be able to surpass 5.7 percent growth due to the economic recovery," Li Xin­chuang, deputy secretary of CISA, told the Global Times Wednesday, noting that the figure was based on China's steel-related projects for this year.

The prediction of 5.7 percent iron ore demand growth is much higher than the 2.9 percent growth that was registered in 2012.

China, the biggest consumer of both steel and iron ore around the world, last year saw its economic growth stay at 7.8 percent, the slowest speed since 1999.

But several national think tanks and foreign banks have made positive forecasts on the development of the world's second largest economy for this year. The Chinese Academy of Social Sciences predicted China's annual GDP will pick up by 8.2 percent, the World Bank forecast 8.4 percent, and JPMorgan said 8.2 percent.

Wang Guoqing, a researcher at Beijing Lange Steel Information Research Center, told the Global Times Wednesday that she agrees iron ore demand will grow this year, but believes the rate will stay at 4 percent or less due to the unpredictable development of steel-related projects such as real estate and infrastructure construction.

However, Wang said, "the price of iron ore is expected to decline, and the trend will continue until 2015 due to an oversupply problem in the global market, which is beneficial to China's steel industry."

According to CISA, China imported 743.5 million tons of iron ore last year, an increase of 8.38 percent year-on-year, but the price on average was $128.58 per ton, a year-on-year drop of 21.52 percent.

The iron ore price decrease last year caused major overseas firms to see declining profits or even losses.

Global miner Rio Tinto earlier this month posted a $3 billion loss for 2012, its first ever full-year loss, partly due to China's slowing demand for iron ore and the price decrease.

"China's steel companies can produce steel products with less of an iron ore cost," said Wang, noting that since the overproduction problem is likely to plague the industry for some time, she does not expect the situation to change in the near future.

Last year, China's 80 major steel companies generated total profits of 1.58 billion yuan ($254 million), down a whopping 98.2 percent from 2011, CISA said.