Chinese steelmakers that have lost money because of volatile global iron ore prices should invest more in foreign mineral resources to gain greater pricing power, the National Development and Reform Commission (NDRC) said. The Commission added that Chinese companies should forge a new model of cooperation between upstream and downstream industries, establishing mines and mills with foreign partners. China, which produces about half of the world’s steel, has been trying to reduce its reliance on iron ore imports from the three top miners in Australia and Brazil－BHP Billiton, Vale and Rio Tinto – which together control three-quarters of the global seaborne trade in iron ore. Last year, China’s imports of iron ore rose 10.2% to 819 million metric tons. The value of imports was up 10.4% to USD105.7 billion. Shipments from Australia and Brazil accounted for almost 70% of the total. Analysts said volatile iron ore prices have exposed steel producers to risks. Liu Xiaoliang, Secretary General of the China Metallurgical Mining Enterprise Association, forecast China’s imports of iron ore will exceed 850 million metric tons this year.

Indonesia’s ban on exports of unprocessed metal ores will boost Chinese shipments of metallurgical coke by as much as 2 million tons a year. In particular, China will supply coke to its firms constructing plants in Indonesia to make nickel pig iron, a substitute for higher-grade refined nickel in stainless steel. The increased shipments underline how Jakarta’s drive to transform its economy into a producer of finished goods, rather than simply a supplier of raw materials, is changing the flow of commodities in the region. A surge in exports by as much as 2 million tons annually would dwarf last year’s 47,000 tons. That growth would provide fresh impetus to China’s overall coke exports, which customs data showed tripled to around 4.67 million tons in 2013 after Beijing scrapped a 40% tax and quota system on coke shipments. The rise in exports is expected to lead to a rise of domestic coke prices, although analysts said the price increase would probably be mild due to a supply surplus in the country. Indonesia provided 58% of China’s 71.3 million tons of nickel ore and concentrate imports in 2013, but such shipments have ground to a halt since the ban on ore exports in January. Seven Chinese companies plan to build smelters in Indonesia. Customs data shows that the No 1 buyer of Chinese coke in 2013 was India, with 1.68 million tons. China’s overall coke exports last year accounted for around just 1% of the country’s total output.

Australia has ruled that China’s state-owned Yanzhou Coal Mining does not need to cut its stake in local unit Yancoal Australia to below 70% and instead can move to 100% ownership. “Significant challenges” had emerged in the coal industry since the ownership conditions were imposed in 2009 as part of a takeover, Australian Treasurer Joe Hockey said. “The government has no in-principle objection to 100% foreign ownership of Australian companies where it is not contrary to the national interest and is open to any such proposals from Yanzhou in the future”, he said. Yanzhou Coal, China’s fourth-largest producer, won approval from the Australian regulator in 2009 for its purchase of Felix Resources for AUD3.3 billion on condition it listed the assets in Australia and reduced its stake to less than 70%. The conditions also provided Yanzhou, which owns 78% of Yancoal, with the ability to seek the Treasurer’s approval to adapt these conditions, Hockey said. The coal industry was experiencing “slowing demand, declining coal prices, and a number of mine closures”, he added. Last year, Yanzhou Coal bought Gloucester Coal and merged it with Yancoal. The combined entity kept Gloucester Coal’s listing and trades in Sydney with a market value of AUD651 million. After the Gloucester Coal deal, Yanzhou Coal was given a deadline of December 31 to reduce its Yancoal stake.

China Shenhua Energy, the listed unit of China’s largest coal producer, Shenhua Group, has cut its capital investment budget by 19% to CNY54.5 billion after posting a 21.6% year-on-year drop in third-quarter net profit to CNY9.43 billion. For the first nine months, net profit declined 11.5% to CNY34.3 billion. The nine-month decline was driven mainly by an 8.6% fall in the average selling price of self-mined coal. Sales were up 2.9%. The firm cited “changes in the external investment and operating environment” and project approval progress for the revision of its overall budget for capacity expansion. All the cuts are related to its coal-mining and logistics operations, including a 38.4% reduction to CNY10.9 billion in spending on new mining capacity and a 20.4% decline to CNY27.9 billion in spending on logistics – covering expenditure on railways, ports and shipping. On the other hand, expenditure on power generation has been revised up by 10% to CNY14 billion, as the firm unveiled lower profit from coal mining and better profit from power production. Coal production costs rose 2% year-on-year due to higher salaries, maintenance and safety expenses, and land acquisition and mining costs. The fall in profit from the mining operations was partially offset by better profit from the power business, which benefited from a 0.8% nine-month rise in the average power selling price and an 8.1% decrease in coal cost per unit of output. Rival China Coal Energy posted a year-on-year fall of 79% in third-quarter net profit to CNY440.5 million, while profit for the nine-month period dropped 54% to CNY3.18 billion. Yanzhou Coal Mining reported a third-quarter net profit of CNY1.8 billion, compared with a CNY131.8 million loss a year earlier. For the first nine months, it had a net loss of CNY588.6 million, against a profit of CNY4.74 billion previously.

The Ministry of Commerce (MOFCOM) said China strongly opposes disclosure of an interim World Trade Organization (WTO) report that disfavors the nation’s claim in its rare earths disputes with other countries. “The case is under panel examination, which is not open. Before the panel issues a final report, any move to disclose the panel examination is under suspicion of violating WTO rules,” the Ministry told China Daily. The Financial Times reported that the WTO had concluded that restrictions by China on the exports of rare earths are not in line with WTO rules. The case concerns the 17 rare earth metals, as well as tungsten and molybdenum, which are widely used in advanced technologies in the defense, electronics and renewable-energy industries. In March 2012, the United States, the European Union and Japan filed a formal complaint to the WTO challenging China’s restrictions on exports of the minerals. In July 2012, the WTO set up a panel to look into the dispute. “China has reiterated its policy of protecting resources and the environment for sustainable development. It has no intention of favoring domestic industry through distorted trade”, MOFCOM said. The final report was expected around the end of the year. Tu Xinquan, Deputy Director of the China Institute for WTO Studies at the University of International Business and Economics, said that China has little hope to win the case, and the government will have to stop rare earths export tariffs. The EU, the U.S. and Mexico won a similar case against China in January 2012 concerning other raw materials. Du Shuaibing, Analyst with the Baichuan Information Co, said China might remove the export quotas on light rare earths but keep them on medium and heavy rare earths, which have smaller production volumes compared with light rare earths.