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Mining companies move offshore for demands -

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Mining companies move offshore for demands

Broadcast: 27/10/2008

Reporter: Stephen McDonell

The impact of the current financial crisis on Chinese steel production has sent shivers through the
Pilbarra. Australian mining companies are preparing for possible hard times ahead as Chinese demand
for iron-ore starts to fall away.

Transcript

TONY JONES, PRESENTER: The impact of the current financial crisis on Chinese steel production has
sent shivers through the Pilbara.

Australian mining companies are preparing for possible hard times ahead as Chinese demand for iron
ore starts to fall away.

So a few of them packed their bags for the Chinese port city of Qingdao to try and shore up demand.

China correspondent Stephen McDonell joined them.

STEPHEN MCDONELL, CHINA CORRESPONDENT: The Chinese coastal city of Qingdao unloads massive amounts
of Australian minerals.

In all, 79 million tonnes of iron ore arrived here last year, making it the world's largest iron
ore port.

But demand for Chinese steel has dropped off; that means less need for Australian raw materials.

SHAN SHANGHUA, CHINA IRON & STEEL ASSOCIATION (Translation): If, let's say, China imports each year
from Australia 150 million tonnes of iron ore, that figure is not going up but down next year.

As to how much less iron ore China needs, it's very hard to predict right now.

STEPHEN MCDONELL: So Australian mining companies are here pushing a message that their high quality
iron ore is what China needs to keep buying in a time of crisis.

RUSSELL SCRIMSHAW, FORTESCUE METALS GROUP: I know things are tight and difficult, but I have
tremendous faith in the resilience of the people of this country and your capabilities.

STEPHEN MCDONELL: But according to China's Iron and Steel Association, 40 per cent of companies in
their industry made a loss in September, and that could increase to 80 per cent for October.

SHAN SHANGHUA (Translation): If the steel market gets better losses in November and December won't
be as great.

STEPHEN MCDONELL: This is a delivery of Australian iron ore on its way to becoming Chinese steel.

The fear is that this will become a less common sight as Chinese steel companies reduce production.

But Australian miners are counting on the Chinese Government to start to boost the economy and keep
these ships rolling in.

It's widely predicted that the Chinese Government won't let the country's economic growth fall
below 8 per cent of GDP.

DR XIANG SONGZUO, FORMER CENTRAL BANK ECONOMIST: The Chinese Government, both the central and the
local governments, control almost all resources.

They can mobilise the resources to stimulate the economy, not like the US and Europe, they must
pass it though the Congress and the Parliament, they are very time consuming.

But China can have a very quick decision; if it wants to do, if we make our mind to do, we can do.

STEPHEN MCDONELL: And many China analysts say that if it isn't preparing a set of measures to pump
up the economy, political and social instability could be just around the corner.

Stephen McDonell, Lateline.