China, the world's biggest iron ore consumer and importer, yesterday raised the threshold for domestic steel makers and trading companies to qualify for imports of the main raw material used to make steel for a second time since 2005.

Now, iron ore importers will need registered capital of at least 20 million yuan (US$2.56 million), double what is currently needed, according to a joint statement from the China Iron & Steel Association and the China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters.

Firms will also be required to have imported at least 700,000 tons of iron ore last year, up from the previous criteria of 300,000 tons.

There are 118 iron ore importers in China, including 70 steel mills and 48 trading companies.

This number will lessen as the new policy goes into effect in February, said Luo Bingsheng, vice-chairman of the China Iron & Steel Association.

Luo declined to reveal how many importers the association thinks will survive.

In May of last year, China cut the number of iron ore importers from 523 to the current level by creating stricter industry regulations.

The latest policy came after China's top steel group, Baosteel, representing more than 100 steel mills in China, last week agreed with CVRD from Brazil and Australia's BHP Billiton and Rio Tinto - the world's three biggest iron ore suppliers - on a 9.5 per cent rise in prices for 2007.

The rise followed a 19 per cent increase this year and a 71.5 per cent hike last year.

The three suppliers, which control over 70 per cent of the global iron ore trade, have been elevating prices in recent years partly due to Chinese importers' rampant purchasing at high prices. "We expect the new regulation will put iron ore imports in order," Luo said.

He said the new policy will add strict resource-saving and environment requirements for domestic steel mills aiming to qualify for iron ore imports.

Both Luo and Chen Haoran, chairman of the chamber of commerce, encouraged small steel mills unable to qualify for iron ore imports to find eligible companies as their "agents" in an effort to secure a stable supply.

However, according to the new policy, importers will be forbidden to sell iron ore to steel makers that have not followed the government's orders to eliminate their outdated production capacity.

Luo said companies trying to qualify for iron ore imports should join the steel association or the commerce chamber and abide by their "co-ordination and self-discipline measures."

Luo estimated China's iron ore imports will amount to 325 million tons this year, up 18.2 per cent from last year. The imports will account for almost half of the global iron ore trade.

Imports next year will grow by 30 million tons, or 9.2 per cent, he said.

Luo and other industry officials predicted earlier that a balance between the global iron ore supply and demand could be expected thanks to swelling production in China and abroad.

Domestic iron ore production is forecast to surge by 28.8 per cent to 644 million tons this year. In 2007, it will grow by 10 per cent, the association predicted.

Both Luo and Chen yesterday said Baosteel's deals with CVRD, BHP Billiton and Rio Tinto was a positive step for the industry in China.

"We are satisfied with Baosteel's performance in the negotiations this year," Luo said. "The price increase (of 9.5 per cent) is acceptable as Chinese steel makers enjoy good profits."

The nation's top 82 steel companies reported 81.1 billion yuan (US$10.4 billion) in combined profits in the first 11 months of this year, climbing 7.64 per cent from a year ago.

He also predicted crude steel production in China would reach 420 million tons this year, up 18 per cent.

2007 production is expected to rise by a slower pace of 10 per cent to 462 million tons, according to Luo.