THE country's industry associations will raise the criteria that trading companies and steel producers need to fulfill before they are granted licenses for importing iron ore from Feb. 1, two metals associations said last week.

The move is aimed at preventing iron ore imports from being processed at outdated steel production plants, and possibly also reducing the country's reliance on iron ore imports, industry players said.

According to new regulations issued by the China Iron and Steel Association (CISA), as well as the China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters (CCCMC), importers must have imported at least 700,000 tons of iron ore in 2005 before they will be granted import licenses.

Previously, the minimum level was 300,000 tons a year, a CCCMC official said.

However, trading companies that do not fulfill the new minimum annual import requirement can choose to form alliances to meet the 700,000-ton-a-year requirement.

In addition, iron ore importers must have registered capital of at least 20 million yuan (US$2.56 million), and steel mills must meet environmental standards before they are allowed to import iron ore.

"It's hard to tell now how many companies will lose licenses this year. We have to examine the companies one by one," said Chen Xianwen, an official at CISA.

China has 118 steel producers and trading firms that are licensed to import iron ore, Chen said.

"We'll also monitor the use of imports to make sure they don't go to mills that are required to be shut down," Chen added.

Earlier last year, the government said that it aims to eliminate 55 million tons of outdated steelmaking capacity before 2007 and another 100 million tons by 2010.

The country's surging production of crude steel, which rose 20 percent in the January-November period to 381.54 million tons, resulted in rising appetite for iron ore, the raw material used in steel production.

Iron ore imports will likely reach 354 million tons in 2007, while domestic production is likely to reach 772 million tons, CISA forecasts.

China imported 297.68 million tons of iron ore in the January-November period, and produced 521.50 million tons, up 20 percent and 38 percent year on year, respectively.

Separately, CISA said last week that Chinese steel mills have played a more important role in the annual iron ore price negotiations with international miners.

Baosteel Group Corp. for the first time set the benchmark price for 2007 term supply. Baosteel agreed to a 9.5 percent iron ore price hike for 2007 supply from Brazil's Companhia Vale do Rio Doce, or CVRD, followed by deals with Australia's BHP Billiton Ltd. and Rio Tinto PLC.

The three firms account for a combined 70 percent of global iron ore export sales.