3.4.1. The actual supply of domestic ore is insufficient

Due to the continuous high output of crude steel in China for many years and the fact that more than 90% of the output is contributed by iron ore (long-flow steel), the demand for iron ore is huge. The output of domestic iron ore increased rapidly, with a compound annual growth rate of about 14%. In terms of quantity, the output of domestic ore is much higher than that of imports. Although the growth of China's own-produced iron ore is rapid, it has been found in actual research that the actual growth of China's domestic iron ore production is much lower than the statistic data. In the statistics data on iron ore production, there is no distinction between finished ore and raw ore, the low grade of raw ore without treatment was put directly into the statistics data, resulting in a sharp rise in China's domestic iron ore output data. In recent years, due to soaring iron ore prices, low grade of 10% of the iron ore is exploited; at the same time, these low grade ore will inevitably push up China iron ore production data.

After iron balance rebound calculation, China made only 210 million tons of domestic finished iron ore in 2014. It is far from 1.5 billion tons which is from statistics data. The self-sufficiency rate of iron ore dropped from nearly 60% in 2002 to a nearly straight decline. The huge contrast between country-made ore and those data of the after iron balance rebound calculation means that the supply of domestic ore is approaching the end of its growth.

### 3.4.2. Foreign iron ore dependence is too high

Although the total reserves of iron ore resources in China are huge, the distribution of iron ore resources is more dispersed, with more lean mines, very few rich mines, and mostly polymetallic iron mines. The ores are difficult to mine, the cost of mining is high, and the actual output cannot meet the production needs of domestic steel mills, therefore domestic steel producers have to choose to import large quantities of iron ore. Since 2000, China's iron ore imports have risen sharply, except a few years. The annual import growth rate once exceeded 40% twice.

With the rapid increase in iron ore imports, there is also a growing dependence on foreign iron ore (Figure 6). From only 36% in 2002, China's iron ore dependence on foreign countries has risen to more than 87% in 2016. In the coming years, the imported iron ore will remain at a high level. With the further price drop of imported iron ore, the domestic mines will be discontinued and the scope of bankruptcy will continue to expand. The import volume will continue to increase. The dependence on foreign iron ore will be over 90%.

Vale do Rio Doce in Brazil) is one of the main channels for China's iron ore imports, accounting for an average annual import volume of about 23%, but its proportion has dropped to 18% due to the substantial increase in the supply of iron ore from Australia in 2016 and 2017. South Africa's imports were relatively small, accounting for about 6% of the total. Australia is the most important source of iron ore. The average annual import volume accounted for 44%. Due to economies of scale and the efficiency gains for mining companies, the mining cost was getting down. Rio Tinto said publicly in 2014 that the cost of mining had fallen to less than \$18/ton. Therefore, China's total imported iron ore from Australia is likely to continue to increase.

The Chinese Iron Ore Deposits and Ore Production http://dx.doi.org/10.5772/intechopen.76729 13

Now that iron ore is no longer a simple mean of production, its financial properties are gradually appearing. The major mines have been firmly controlled by financial capital (Figure 8). After understanding the global iron ore production costs, it is possible to speculate on the soaring of iron ore prices in previous years that the huge financial capital behind it is the most important promoter. At the present stage where the political situation is relatively stable, the main risk of over-concentration of import sources is the manipulation of iron ore prices stemming from the financial capital giants behind the mines. If the political situation in the future changes suddenly and the relevant governments at the source of imports restrict the export of iron ore to China, the steel industry will also face a nastier situation, which will in turn affect the social stability.

Before 2002, iron ore was the absolute buyer's market. In order to facilitate the purchase of Chinese enterprises, the three major companies (Rio Tinto, BHP Billiton and Companhia Vale do Rio Doce) at that time even gave a rebate, and the price of iron ore has been relatively low. However, with the rapid economic growth in China, the continuous expansion of production capacity in the iron and steel industry directly led to the soaring iron ore prices (Figure 9). Due to the fact that many Chinese small and medium iron and steel enterprises are not eligible for long-term agreement price, their huge demand has pushed up the price of spot market. From 2007 to 2013, demand growth was too fast, iron ore was in short supply and prices rose sharply. After 2014, due to the newly increased output of iron ore put into operation by the

Figure 8. Rio Tinto, BHP Billiton, and Companhia Vale do Rio Doce financial capital structure.

3.4.4. Iron ore prices fluctuated sharply

#### 3.4.3. Iron ore import source is too concentrated

China's imports of iron ore are mainly iron ore powder, massive iron ore (raw ore) and pellets, respectively, from more than 30 countries and regions, in which Australia, Brazil, India and South Africa are China's most important source of iron ore imports. The imports from the four countries accounted for about 85% (Figure 7). To protect its iron ore resources, the Indian government gives priority to ensuring its domestic steel production needs. Since 2011, the Indian government has increased export tariffs on iron ores and restricted exports. In recent years, the number of imported iron ore from India has been declining year by year. CVRD (Companhia

Figure 6. China iron ore dependence on foreign countries.

Figure 7. China iron ore import country analysis (left axis account for Australia, India, Brazil South Africa of the total import volume, and right axis account for sum of the four places mentioned above for the total import volume of the whole China).

Vale do Rio Doce in Brazil) is one of the main channels for China's iron ore imports, accounting for an average annual import volume of about 23%, but its proportion has dropped to 18% due to the substantial increase in the supply of iron ore from Australia in 2016 and 2017. South Africa's imports were relatively small, accounting for about 6% of the total. Australia is the most important source of iron ore. The average annual import volume accounted for 44%. Due to economies of scale and the efficiency gains for mining companies, the mining cost was getting down. Rio Tinto said publicly in 2014 that the cost of mining had fallen to less than \$18/ton. Therefore, China's total imported iron ore from Australia is likely to continue to increase.

Now that iron ore is no longer a simple mean of production, its financial properties are gradually appearing. The major mines have been firmly controlled by financial capital (Figure 8). After understanding the global iron ore production costs, it is possible to speculate on the soaring of iron ore prices in previous years that the huge financial capital behind it is the most important promoter. At the present stage where the political situation is relatively stable, the main risk of over-concentration of import sources is the manipulation of iron ore prices stemming from the financial capital giants behind the mines. If the political situation in the future changes suddenly and the relevant governments at the source of imports restrict the export of iron ore to China, the steel industry will also face a nastier situation, which will in turn affect the social stability.

### 3.4.4. Iron ore prices fluctuated sharply

high level. With the further price drop of imported iron ore, the domestic mines will be discontinued and the scope of bankruptcy will continue to expand. The import volume will

China's imports of iron ore are mainly iron ore powder, massive iron ore (raw ore) and pellets, respectively, from more than 30 countries and regions, in which Australia, Brazil, India and South Africa are China's most important source of iron ore imports. The imports from the four countries accounted for about 85% (Figure 7). To protect its iron ore resources, the Indian government gives priority to ensuring its domestic steel production needs. Since 2011, the Indian government has increased export tariffs on iron ores and restricted exports. In recent years, the number of imported iron ore from India has been declining year by year. CVRD (Companhia

Figure 7. China iron ore import country analysis (left axis account for Australia, India, Brazil South Africa of the total import volume, and right axis account for sum of the four places mentioned above for the total import volume of the

continue to increase. The dependence on foreign iron ore will be over 90%.

3.4.3. Iron ore import source is too concentrated

12 Iron Ores and Iron Oxide Materials

Figure 6. China iron ore dependence on foreign countries.

whole China).

Before 2002, iron ore was the absolute buyer's market. In order to facilitate the purchase of Chinese enterprises, the three major companies (Rio Tinto, BHP Billiton and Companhia Vale do Rio Doce) at that time even gave a rebate, and the price of iron ore has been relatively low. However, with the rapid economic growth in China, the continuous expansion of production capacity in the iron and steel industry directly led to the soaring iron ore prices (Figure 9). Due to the fact that many Chinese small and medium iron and steel enterprises are not eligible for long-term agreement price, their huge demand has pushed up the price of spot market. From 2007 to 2013, demand growth was too fast, iron ore was in short supply and prices rose sharply. After 2014, due to the newly increased output of iron ore put into operation by the

Figure 8. Rio Tinto, BHP Billiton, and Companhia Vale do Rio Doce financial capital structure.

reached as high as 20 billion U.S. dollars [17]. In fact, most overseas iron ore projects cost more than US \$100/ton. (B) Large stake, high risk, hard to quit. Chinese enterprises target for the leading enterprises or the top few companies. Most of these large-scale overseas investment enterprises are state-owned. Because their management does not make money for the purpose of their business, but rather their personal performance as the starting point, they just want to make big achievements, win media acclaim and earn their personal social reputation, resulting in state-owned enterprises inefficiency and the investment frequently failed. For example, Shougang group tried to buy most of all stock right of a Peru company, Aluminum Corporation of China bought Rio Tinto and China Minemetals Corporation bought OZ. In certain sense, all failed. This may give the absolute control over the acquisition of the business, but at the same time will inevitably increase the operational burden. This type of large investment, which concerns only one company, will weaken the risk-resist capability greatly. Once a sharp decline in ore prices, lower profitability, or even loss, companies will be difficult to quit smoothly. Japanese did the opposite. Instead of pursuing the holding of the other side's enterprises, they hold mostly 10% or even lower of the stock of target company. In addition, they did not choose the big ones. The manager of the Japanese company did not seek reputation. Japanese businessmen aim at maximizing business profits, and their business decisions are based on costs and benefits. For example, Mitsui & Co., Nippon Steel and Sumitomo Metal jointly owned Robe River Company of Australian, and then supported the expansion of the

The Chinese Iron Ore Deposits and Ore Production http://dx.doi.org/10.5772/intechopen.76729 15

Compared with Japan, China's overseas iron ore investment started recently, and is still in the learning stage, compared with Japan's investment efficiency and return on investment is still a big gap. Chinese enterprises and the Chinese government still urgently need to learn from Japan on the concept of iron ore overseas investment, management experience and risk pre-

In order to improve the self-sufficiency rate of iron ore and get rid of the shackles of foreign mining giants, a great deal of research work has been carried out by relevant researchers

In China, iron ore with hematite grain size of less than 0.045 mm or magnetite grain size of less than 0.03 mm is commonly referred to as fine-grained iron ore [18]. Yuanjiacun Iron deposit and Qidong Iron deposit in Shanxi and Hunan Province, respectively, are the most typical fine grain iron deposits in China. The Taiyuan Iron and Steel Group and scientific research units, who aimed at the Yuanjiacun iron ore recycle and conduct a large number of experimental studies. The original iron ore grade of 31.18%, 0.045 mm particle size accounted for 93.81% of the total ore, they got concentrate iron grade 66.95%, and recovery rate of 72.62%. With this process, the Yuanjiacun iron deposit built a mineral processing plant with annual capacity of

company, which indirectly press Rio Tinto and BHP Billiton.

4. Mineral processing and ore metallurgy technology

around the efficient utilization of iron ore resources.

4.1. Fine grain iron ore beneficiation

vention.

Figure 9. Japan's Shinkansen iron ore price index.

global mining enterprises in 2014–2015, the supply of iron ore will be oversupplied. Iron ore prices fell for 4 consecutive years, until 2016, however, from 2016, it reversed again. It rose slightly (Figure 9). Over the past 10 years, iron ore prices have experienced two rounds of highs and lows, and the highest point has surpassed 180 US dollars/ton, while the lows have already broken through 50 US dollars/ton.

#### 3.4.5. Obtaining overseas rights and interests mines is difficult

Iron ore resources in any country belong to the strategic mineral resources, with the interests of nations, in any country are highly concerned about. With the economic development and social construction of third world countries, the demand for iron and steel resources will inevitably increase the demand for iron ore resources. In the future, the emerging economies in the world will compete for iron ore resources more intensively. The high grade and large reserve mines are occupied by the international mining giants. Besides, international mining giants relying on their strong business base for many years, still in the form of acquisitions, mergers and other forms of global search for high-quality iron ore resources, are still constantly expanding their sphere of influence. China's steel enterprises that want to get highquality mines are very difficult. They missed best time to purchase high-quality mines oversea. In addition, Japanese consortium set malicious difficulties to them. China's steel mills have paid a huge price for this. It mainly include: (A) the acquisition cost is too high. Currently, the average grade of overseas iron ore resource invested by the Chinese side is about 40%. Although its quality is inferior to that of the United States, Europe and Japan, it is still superior to the domestic iron ore [14]. Overseas mines geographical locations are mostly terrible, need to increase a large number of mineral processing, power plants, water and other facilities investment in construction, development and construction costs will inevitably increase [14]. According to the current investment in projects under construction estimates, the first phase of overseas iron ore development projects to build capacity of 10 million tons of investment is about 2 billion US dollars on average; if it is a low grade one, the investment will require nearly 3 billion US dollars, such as the Guinea project, the total investment of the project has now reached as high as 20 billion U.S. dollars [17]. In fact, most overseas iron ore projects cost more than US \$100/ton. (B) Large stake, high risk, hard to quit. Chinese enterprises target for the leading enterprises or the top few companies. Most of these large-scale overseas investment enterprises are state-owned. Because their management does not make money for the purpose of their business, but rather their personal performance as the starting point, they just want to make big achievements, win media acclaim and earn their personal social reputation, resulting in state-owned enterprises inefficiency and the investment frequently failed. For example, Shougang group tried to buy most of all stock right of a Peru company, Aluminum Corporation of China bought Rio Tinto and China Minemetals Corporation bought OZ. In certain sense, all failed. This may give the absolute control over the acquisition of the business, but at the same time will inevitably increase the operational burden. This type of large investment, which concerns only one company, will weaken the risk-resist capability greatly. Once a sharp decline in ore prices, lower profitability, or even loss, companies will be difficult to quit smoothly. Japanese did the opposite. Instead of pursuing the holding of the other side's enterprises, they hold mostly 10% or even lower of the stock of target company. In addition, they did not choose the big ones. The manager of the Japanese company did not seek reputation. Japanese businessmen aim at maximizing business profits, and their business decisions are based on costs and benefits. For example, Mitsui & Co., Nippon Steel and Sumitomo Metal jointly owned Robe River Company of Australian, and then supported the expansion of the company, which indirectly press Rio Tinto and BHP Billiton.

Compared with Japan, China's overseas iron ore investment started recently, and is still in the learning stage, compared with Japan's investment efficiency and return on investment is still a big gap. Chinese enterprises and the Chinese government still urgently need to learn from Japan on the concept of iron ore overseas investment, management experience and risk prevention.
