OREANDA-NEWS. Fitch Ratings expects fewer Chinese iron ore mine closures in 2015 as the government takes steps to support the industry, which has been struggling with lower prices, and as most of the remaining mines have better attributes.

Fitch expects the government to continue introducing direct or indirect subsidies to support iron ore miners after a sharp downturn in iron ore prices in 2014 forced a slew of mines to close and increased China's reliance on imports, which reached an all-time high in 2014. The Chinese government recently said it would halve the resource tax on domestic iron ore producers to 40% from 80% from 1 May 2015, which would result in cost savings of about CNY6-15 a tonne for the miners.

Iron ore capacities in China that are still surviving either operate at lower costs, have higher grade products, are vertically integrated with steel mills, or are state-owned, which would make them less susceptible to closure.

According to the China Steel Association, the country's iron ore imports rose 13.8% in 2014 to 933 million tonnes, accounting for 78.5% of national consumption, and a 9.7pp increase from the previous year. Imports will continue to rise in 2015 as more Chinese miners shut, which will further strengthen the bargaining power of large international iron ore producers, something the Chinese government and the domestic steel industry would not want to see.

Chinese producers generally have higher production costs than their large global peers, and have struggled to compete as cheaper supply continued to flood the market. The industry association in China estimates that over 50% of Chinese iron ore mines produce at a cash cost of more than CNY500/tonne (USD81/tonne), compared with large global miners' USD20-35/tonne. Support from the Chinese government would provide a lifeline to keep domestic supply in the market for longer than would be otherwise possible.