Demand for iron ore in China, the world's biggest importer of the steelmaking raw material, will grow at a faster pace this year, in step with an improving economy that should boost consumption of steel, an industry official said.
Iron ore prices hit 16-month highs near $160 a tonne last week as the Chinese braced for a pickup in steel demand, rebounding more than 80 percent from three-year lows in September.
China's iron ore demand is expected to rise by 5.7 percent this year to 1.11 billion tonnes, Li Xinchuang, the deputy secretary general of the China Iron and Steel Association (CISA) told an industry conference.
The country's iron ore demand rose 2.9 percent last year to 1.05 billion tonnes.
"The Chinese economy in 2013 is still in recovery mode, but overall it will be better than in 2012, with GDP growth predicted at about 8 percent and fixed asset investment to grow 20 percent," he said.
China's economy is likely to expand by 8.1 percent this year from 7.8 percent in 2012, its slowest pace since 1999, according to a Reuters poll in January.
The country, which buys two thirds of the world's iron ore, imported a record 743.55 million tonnes in 2012, up 8.4 percent from the previous year. It produced more than 1.3 billion tonnes of mostly low quality ore over the year.
Li said Chinese steel demand was expected to rise 4.1 percent in 2013 to reach 666 million tonnes.
According to CISA data on Wednesday, China produced an average of 2.01 million tonnes of crude steel a day over the Feb. 11-20 period, its highest level since last May.
Li also said China's total crude steel capacity now stood at 970 million tonnes, more than seven times higher than in 2000. Last year, its crude steel output was 716.5 million tonnes.
Local governments, still desperately pursuing economic growth, were still approving new steel projects, Li said, even though overcapacity has been identified as one of the major problems facing the sector.
He said that China's plan to consolidate the sector and bring 60 percent of capacity under the control of the country's top 10 steel mills was still facing bureaucratic problems, with local authorities still concerned about the possible loss of tax revenues as a result of mergers.
He said CISA's main members made 42.7 billion yuan ($6.9 billion) in losses from their core steel business in 2012, largely because they were unable to pass on higher iron ore costs to consumers.
China is scrutinising a plan to slash capacity by as much as a fifth in its biggest steel producing region of Hebei province.
"The plan has basically been approved and will be appraised shortly," Li said on the sidelines of the conference.
China also aims to curbs expansions of steel capacity in major cities as part of its plans to reduce air pollution.