China's steel industry is close to peak production and will not reach the highs predicted by big miners such as Rio Tinto and BHP Billiton, a Chinese steel official has told a conference in Melbourne.
In comments that are bearish for the Australian iron ore industry, China Iron and Steel Association (CISA) deputy-secretary-general Li Xinchuang said steel production had gone above 800 million tonnes this year, but the growth rates were slowing significantly.
The big miners have long predicted that China's steel industry will peak at around 1 billion tonnes per year of iron ore, but Mr Li said it was more likely to peak around 870 million tonnes.
"Over the next 10 years, according to our studies, China's steel production can be over 800 million tonnes for a long time, but it cannot go over 900 million tonnes," he said at the International Mining and Resource Conference in Melbourne on Monday.
Mr Li said while steel production and iron ore demand was still growing in China, it was now doing so at much slower rates.
"The China market not as good as before," he said.
An early peak in the Chinese steel industry would not be good news for the iron ore industry, which thrives when Chinese steel production is booming.
Iron ore prices have slumped to $US81.7 per tonne in recent days; a level that is little more than break-even for several medium sized Australian miners.
Mr Li said there would be no stimulus for the Chinese steel industry in the near future and there was little prospect of iron ore prices returning above $US100 per tonne.
"It will be roughly around $US80 per tonne for a long time because the volumes (of iron ore imports) increase very fast," he said.
Mr Li said China imported just over 800 million tonnes of iron ore last year and was on track to import closer to 900 million tonnes this year.
Despite lower iron ore prices, he said that was still a reasonable market for Australian producers to be selling into.
"That will give a strong market, a stable market for iron ore," he said.
CISA represents the Chinese steel industry, and therefore has an incentive to talk down the iron ore price in the same way mining companies in Australia have an incentive to talk it up.
When asked why his prediction differed from that of the big miners, Mr Li said; "Maybe they give that story for the investor, I'm not sure".
"Trust me, I've been in the business 30 years."
Despite popular perceptions, Mr Li said the Chinese steel industry was driven by market forces, and so many Chinese iron ore mines would close if the price dropped to $US70 per tonne.
Mr Li's comments come barely a fortnight after former BHP executive Alberto Calderon gave a downbeat assessment of the iron ore industry, based on the expectation that China would soon begin recycling significant amounts of the steel used in its early years of urbanisation, which would also hurt demand for iron ore.
