It is said from China’s Commerce Ministry on Thursday that an investigation showed U.S. and Russian exporters were dumping steel used for power generation and ordered that importers pay deposits to compensate.

As of last Friday, importers of flat-rolled electrical steel, a product used in the power industry, sold by U.S. companies will have to pay dumping margins of 10.7 percent to 25 percent, the ministry said in a statement on its Web site.

Importing the steel from Russian companies will incur similar subsidies of 4.6 percent to 25 percent, it said.

The deposits will be imposed pending final results of the investigation, which are also in retaliation for U.S. subsidies for steel companies, it said.

“The domestic steel industry has suffered substantial damage,” the ministry said, emphasizing the measures were consistent with World Trade Organization rules.

China has lashed out at similar probes of its own exporters, saying such moves are protectionism.

The U.S. Commerce Department has imposed duties of up to 99 percent on imports of Chinese-made steel pipe used in the oil and gas industry. China says the U.S. side used the wrong formula to calculate the cost of goods, and the duties it imposed were too high.

The disputes are among a series between Beijing and Washington, which also include conflicts over access to each others’ markets for tires, music and movies.

Steel analyst Michelle Applebaum said in her Steel Market Intelligence report the amount of product involved in the trade suit “is truly trivial,” because it is less than a tenth of a percent of the Chinese market. Applebaum said the case is an effort to “stem a surging tide of Western complaints about China’s high cost and subsidized steel industry’s exports.”

November steel exports from China rose to their highest level in 2009 to about 3.2 million short tons, up from about 3 million short tons a month earlier. Applebaum said these production levels have prompted steel producers to seek more export opportunities.

It is reported on December 12 that the government of the northeastern Chinese province of Hebei announced the discovery of an iron ore deposit, the Macheng deposit, with proven reserves of 1.044 billion metric tons – the largest such single iron ore deposit found in China since the 1980s.

Located in Luannan, Tangshan city, the Macheng deposit, which will be developed by Hebei Steel Group, has estimated unproven reserves of 500 million metric tons, in addition to its proven reserves.

Moreover, the Macheng deposit is situated at depths ranging from 100 meters to 600 meters, and is comparatively easy to mine. The deposit is 6 km long and 41.43 meters to 108.95 meters thick on average.

According to Lei Pingxi of the China Metallurgical Mining Enterprise Association, China is not short of iron ore resources. Based on the rapid growths in both investment and development in domestic mines, China’s iron ore output is expected to reach 1.1-1.2 billion metric tons by year 2015, Mr Lei said.

Meanwhile, he added that Chinese enterprises are making efforts to invest in overseas mines. It is estimated that by 2015 70 percent of the raw material demand of China’s steel industry will be satisfied by iron ore materials produced by domestic mines and by overseas mines held by Chinese enterprises.

After a surge in demand from China, forecasts for annual contract prices for iron ore, a $160 billion-a year-global market, were raised by Macquarie Group Ltd. and JPMorgan Chase & Co..

Australian benchmark iron ore prices may rise 30 percent, Macquarie analysts led by London-based Jim Lennon said today in a report.

That compares with their previous estimate for a 10 percent gain. JPMorgan yesterday raised its forecast increase to 20 percent from 10 percent.

Steelmakers and traders in China, the world’s biggest consumers, boosted imports 12 percent last month to meet demand from makers of cars and appliances. Iron-ore demand from U.S. and European steelmakers will also increase next year, joining China, Vale SA, the world’s largest producer, said yesterday.

“Undoubtedly, rampant Chinese growth is still the main story in the steel industry,” the Macquarie analysts said. “We remain very bullish on Chinese demand growth through 2010 and beyond, which will create tightness in the steel market during the second half of next year.”

Rio Tinto Group, the world’s second-biggest iron ore exporter, rose 0.5 percent to A$70.85 at the 4:10 p.m. Sydney time close on the Australian stock exchange. BHP Billiton Ltd., the third-biggest exporter, rose 1.1 percent. Both companies had their ratings raised yesterday by JPMorgan.

JPMorgan joins UBS AG and Goldman Sachs JBWere Pty in predicting a 20 percent gain. Vale may delay starting price talks until early next year as it seeks more market data, Chief Executive Officer Roger Agnelli told reporters yesterday.

Fractured Talks

The four-decade old annual iron ore pricing system was fractured this year after Chinese mills failed to reach agreement with the three largest suppliers. Rio Tinto last week appointed a new chief negotiator with Asian steelmakers, boosting prospects for the latest talks.

Iron ore cash sales have recently been completed at as much as a 45 percent premium to last year’s benchmark and prices may continue to rise in the coming months, Macquarie said. The bank raised its forecast to 125 cents a dry metric ton unit for Australian iron ore fines. That’s about $79 a ton compared with last year’s settlement of about $61 a ton.

China this year demanded a bigger price cut for iron ore than the 33 percent offered to Japanese and Korean mills by Rio and BHP. Baosteel Group Corp., China’s largest steelmaker, this month announced the first price gains for its products in four months as demand rebounds.

JPMorgan boosted its estimates for 2010 earnings per share, at Rio and BHP by 30 percent and 16 percent respectively on higher metals forecasts. Analysts led by David George raised their rating on BHP to “neutral” from “underweight” and Rio was raised to “overweight” from “neutral.”"We never comment on pricing discussions,” said Rio spokesman Gervase Greene. BHP spokeswoman Kelly Quirke declined to comment.

It is reported from China Daily newspaper on Wednesday that Brazilian mining giant Vale will reduce the delivery price of iron ore sold to China next year.

The report, citing an unnamed official with a Chinese steel company, said Vale has already signed long-term freight price agreements with a number of local mills, offering discounts of 20-30 percent.

Vale’s chief executive, Roger Agnelli, told reporters on Monday that the company had not yet begun discussing next year’s contract iron ore prices with Chinese steel mills.

The company has been making efforts to improve its market share in China, the world’s biggest iron ore consumer, especially in light of a controversial production joint venture between its two major rivals, BHP Billiton and Rio Tinto of Australia.

In order to help it compete, the company is planning to set up a regional distribution centre in China, and will cut costs further by building 16 dedicated ore carriers, the China Daily said.

It is also in talks to establish long-term supply contracts with some of China’s smaller steel mills, according to a report in China’s 21st Century Business Herald.

The China Iron and Steel Association has already sent a delegation to Brazil to discuss joint action to oppose the BHP-Rio merger, the Australian Financial Review said this week.