MaSSSoftech

Published: 13 Aug 2009 11:02:01 PST

By Chen Xiaomin

Li Yizhong, minister of industry and information technology, talks to reporters after the news conference yesterday. Photo: IC

The Ministry of Industry and Information Technology will not directly get involved in ongoing negotiations over iron ore prices, Minister Li Yizhong said yesterday.

The ministry, which oversees 39 industries, said the country is supposed to have a bigger influence in that market.

“We should be united in iron ore talks and pick one entity to represent the country’s steel Industry to eliminate internal conflicts and disorderly competition,” Li said in response to a reporter’s question at a press conference.

Li said he was optimistic that business relations between the world’s largest iron ore importer and the three major supplier countries would remain stable, and a solution would be worked out due to their correlated interests, without government involvement.

The country has been working to obtain at least a 40 percent cut in iron ore price from the world’s three biggest mining companies – Vale of Brazil, Rio Tinto and BHP Billiton of Australia, instead of the 33 percent reduction reached between Rio Tinto and Japanese and South Korean mills.

The annual negotiation was extended one month after the normal deadline – June 30.

While the contract price negotiation reached a deadlock, spot price soared to a 10-month high. Figures from Umetal show Indian ore of 63 percent iron content at Tianjin port climbed to 870 yuan ($127.31) per ton Wednesday, up 36 percent from 640 yuan in June.

Li also said yesterday that the ministry would speed up industrial restructuring while ensuring industrial growth in the second half of 2009 by highlighting mergers and acquisitions, curtailing energy use and emission, and implementing technical upgrades.

Li said the ministry was working on a document on mergers and acquisitions and is eliminating outdated equipment and technologies in an attempt to increase efficiency.

Mergers and acquisitions can help reduce overcapacity in some sectors, he said, explaining that overcapacity in the iron and steel industry is most noticeable. He said steel mills were urged not to start new production projects within the next three years.

The capacity was 660 million tons last year and demand was 470 million tons – an oversupply of 190 million tons.

Nevertheless, there are some new iron and steel projects with 58-million-ton new production capacities.

Saving energy and reducing emissions are priorities on the ministry’s agenda, he said, because industrial sectors consume about 70 percent of the country’s energy.

“Policies will still be carried out in the second half to encourage the replacement of old autos nationwide,” said Li.

The government spent 12 billion yuan ($1.76 billion) to encourage people to buy fuel-efficient vehicles.

It did so by cutting the sales tax in half, which led to the sale of more than 1 million vehicles for five months straight until July. The policy will expire December 31.

Li also noted that the ministry would issue guiding opinions on energy saving and emission reduction work to major industries and set up a system to encourage energy efficient programs.

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