Feb. 27, 2007 (China Knowledge) –The number of Chinese companies allowed to import iron ore will be cut from 118 to 116 in 2007, according to the China Securities Journal, a number which is higher than market expectations.

It was previously estimated that the number of companies with the rights to import iron will be cut from 118 to about 90-something after new qualification guidelines were introduced by the China Iron and Steel Association (CISA) and the China Chamber of Commerce of Metals, Minerals and Chemicals Importers & Exporters (CCCMC) in December 2006.

In March 2005, CISA and CCCMC jointly promulgated an older version of the qualification guidelines to allow companies import iron from overseas. After that reshuffle, the number of qualified companies was reduced from 523 to 118.

Currently, although China is the world largest steel maker, its market is fairly fragmented. In 2006, Baosteel, the country’s biggest steel maker, produced 23.4 million tons steel products, which accounted for only 5% of the national total.

In comparison, the supply of iron ore in the overseas market is dominated by a few players, such as BHP Billiton, Rio Tinto and CVRD. To increase its negotiating clout and also to reach economies of scale, China has stepped up its efforts to consolidate the market, and part of its strategy is the tightening of import controls.