Expect Chinese companies to invest in overseas mining rather than spending on domestic iron ore production, a strategist predicted.

Speaking at CRU’s 17th World Steel Conference in Rome, Handelsbanken’s Senior Commodity Strategist Martin Jansson said global iron ore production was dominated by four countries.

In a presentation titled Iron ore market – Key factors for the future, he said Australia and Brazil dominate, India is catching up, while China has about 13% of production. These four countries account for 70% of world production.

China accounts for about 60% of demand. Its blast furnace steel works are mostly based in the east. The ‘big three’ iron ore producers (Vale, Rio Tinto and BHP Billiton) control 80% of the seaborne market.

In ‘eastern’ countries such as Russia, China and Japan there is a strong tendency between mines and steelworks. Chinese steel companies especially are very active in this market – such as joint ventures in Australia.

There has been an amazing increase in Chinese iron ore imports because of its low grade ore in its own mines. The average grade has fallen from 40% to 20% and this has led to a strong seaborne market.

The average grade of Chinese own production is likely to be lower than 30%, Mr Jansson said.