(Repeats earlier story with no change in text)
* China plans 6-8 big iron ore miners to rely less on imports
* But high costs, low ore quality may hinder goal
* Vale, Rio, BHP on track to boost output even more
By Ruby Lian and David Stanway
SHANGHAI, April 16 (Reuters) - China's bid to slash its dependence on foreign iron ore miners by creating its own mega producers risks running aground before it starts due to high costs and poor quality of ore. Instead, overseas suppliers may end up shipping more to their top market.
For two decades, China has been trying to reduce its reliance on iron ore supplied by top producers Vale, Rio Tinto and BHP Billiton without much success because the price of the ore it produces is higher.
These global miners are boosting output to capture more of the Chinese market through massive expansion schemes to increase their dominance. BHP on Wednesday lifted its annual iron ore production guidance to 217 million tonnes, while Rio Tinto is close to mining 300 million tonnes a year and Brazil's Vale is targeting more than 360 million tonnes.
In an effort to make its own iron ore mining more efficient, China, which buys more than two thirds of the world's iron ore, is drafting a plan to create six to eight domestic iron ore miners by 2025, each with an annual capacity of more than 30 million tonnes, state news agency Xinhua has reported.
Beijing wants Anshan Iron & Steel Group, a steelmaker with its own iron ore mines, and the Metallurgical Mines' Association of China (MMAC) to lead the plan. A draft is expected by year end to be submitted to the State Council for approval.
However, combined production would at best amount to only a third of total demand, making a target to cut imports to below half of China's requirement within 10 years look impossible and suggests big global miners may have to ship even more.
While Chinese iron ore production continues to grow every year, the low quality of the ore is forcing miners to dig deeper and bloating costs even more.
"The only way for the new integrated miners to compete against top miners is if they can slash their costs, but I do not expect this can happen," said a senior official at a medium-sized Chinese miner with annual output of 2-3 million tonnes.
"Chinese resources require deeper and deeper digging, and grades are falling, meaning both mining and beneficiation (crushing and separating ore) costs are increasing," said the official, who declined to be named due to a company policy of not speaking to media.
The average iron content of ore in China fell to 21.5 percent last year from 31.2 percent 10 years earlier, said Pan Guocheng, chief executive of China Hanking Holdings Ltd , a privately owned mainland miner.
In contrast, iron content for most Australian and Brazilian ore tops 57 percent. This lifts the average cost for Chinese miners to $105 a tonne, with some spending as much as $140, compared with $60-$65 including delivery for Australian and Brazilian ores, according to MMAC.
If the iron ore price drops below $100, then 40-50 percent of Chinese miners could close their mines and cut output by about 150 million tonnes, Pan said at a conference in February.
At around $117 a tonne currently, iron ore .IO62-CNI=SI has lost nearly 13 percent of its value this year and is down about 40 percent from a peak of almost $200 in February 2011.
Since 2003, China has also urged its steelmakers to cut their dependence on Vale, Rio Tinto and BHP by investing in new mines globally, with the aim of sourcing at least 40 percent of imports from China-owned projects. However, with high costs and weaker prices, projects have struggled to get off the ground.
A 25 percent tax on sales is another disincentive for Chinese miners, while Australian and Brazilian miners are taxed at a rate of only 4-5 percent.
China's iron ore output rose 4 percent to 183.3 million tonnes in the first two months, slowing from 13.5 percent growth in the same period last year, official data showed.
More stringent environmental protection measures targeting China's highly polluting steel sector are also forcing mills to look for higher-grade imported iron ore.
Jeffrey Landsberg, managing director of U.S.-based Commodore Research & Consultancy, said low spot iron ore prices, driven by ongoing production expansions, would continue to tip the market in favour of the big foreign suppliers.
"We anticipate that low iron ore prices will continue to put pressure on iron ore production growth in China this year, and that Chinese iron ore import growth will finish the year well above Chinese iron ore production growth," he said. (Editing by Manolo Serapio Jr. and Ed Davies)