Surging spot prices of iron ore are forcing steel mills to look for more domestic supplies, something that would also reduce their dependence on costly imports, industry insiders said.
Beijing Ye-Steel Trading Co, a private steel mill that buys ore from the spot market, has stopped buying imported iron ore after prices surged to above $130 per ton in February.
"We are now buying domestic iron ore with a 66 percent iron content priced at 1,080 yuan ($158) per ton including tax, much cheaper than imported ore," said a sales manager from Ye-Steel who declined to be named. The company is one of several steelmakers choosing domestic iron ore sources more often.
Industry analyst Xu Xiangchun from consulting firm Mysteel said that since the spot price of imported iron ore is higher, many steel mills have increased offtake from domestic sources, especially from Hebei province where most of China's mines are located.
This should help to keep rising imported iron ore prices in check, he said.