China’s bid to slash its dependence on foreign iron ore miners by creating its own mega producers risks running aground before it starts due to high costs and poor quality of ore. Instead, overseas suppliers may end up shipping more to their top market. For two decades, China has been trying to reduce its reliance on iron ore supplied by top producers Vale, Rio Tinto and BHP Billiton without much success because the price of the ore it produces is higher. The global miners are boosting output to capture more of the Chinese market through massive expansion to increase their dominance. BHP lifted its annual production target to 217 million tons, while Rio Tinto is close to mining 300 million tons a year and Brazil’s Vale is targeting more than 360 million tons. To make its own iron ore mining more efficient, China, which buys more than two-thirds of the world’s iron ore, was drafting a plan to create six to eight domestic miners by 2025, each with an annual capacity of more than 30 million tons. A draft of the plan is expected to be submitted to the central government by the end of the year. Combined production would at best amount to only a third of total demand. While Chinese iron ore production continues to grow every year, the low quality of the ore is forcing miners to dig deeper and increasing costs even more. “The only way for the new integrated miners to compete against top miners is if they can slash their costs, but I do not expect this can happen,” said a senior official at a medium-sized Chinese miner with an annual output of 2 million to 3 million tons. The average iron content of ore in China fell to 21.5% last year from 31.2% 10 years earlier, said Pan Guocheng, Chief Executive of privately-owned miner China Hanking. The average cost of Chinese miners is USD105 a ton, compared with USD60 to USD65 including delivery for Australian and Brazilian ores, the South China Morning Post reports. China’s iron ore output rose 4% to 183.3 million tons in the first two months, slowing from 13.5% last year.