SHANGHAI: China Shipping (Group) Company (CSC) yesterday signed a framework agreement on strategic co-operation with Baosteel Group to become its major potential iron ore and coal carrier.

Chen Changhai, general manager of CSC's Transportation Department, said the co-operation will make CSC more involved in Baosteel's ocean-going transport business.

At present, Baosteel relies heavily on foreign freighters to ship ore from Brazil and Australia to Shanghai.

Baosteel signed a 20-year transport agreement with Japan's Mitsui O.S.K. Lines Ltd in March which will carry ore from Brazil to China using 300,000-tonnage ships.

Under the agreement, Mitsui will ship 1.3 million tons of ore every year for Baosteel as a new 300,000-tonnage freighter is launched at the end of 2008.

But local insiders said Baosteel needs co-operation with more shipping companies to meet its demands.

Wang Huaqiang, general manager of the International Shipping Department of Shanghai Baosteel International Economics and Trading Co Ltd, said Baosteel is expected to consume 30 million tons of ore this year for production of 20 million tons of iron and steel.

Sixty per cent of the ore will be shipped from Australia and 40 per cent from Brazil.

At present, CSC ships annually land some 12 million tons of ore and coal for Baosteel, made up of 7 million tons of coal and 4.8 million tons of ore.

The transport volume accounts for 60 per cent of the ore and coal Baosteel needs by coastal shipping, said Mao Jianjun, general manager of the Domestic Shipping Department of the Shanghai Baosteel International Economic and Trading Co Ltd.

Chen says a working group will be set up after the signing ceremony to discuss methods of building ships and the number of ships needed.

The ocean-going transportation calls for a fleet of 300,000-tonnage bulk freighters. "Once the decision is made, CSC will bid for builders," said Chen.

As one of the world's top 500 companies, Baosteel plans to produce 30 million tons of iron and steel in 2008.

The target, Wang said, means that Baosteel is expected to consume at least 45 million tons of imported ore annually.

"The huge amount of ore needs a large fleet to ship," he said.

He said a 300,000-tonnage ship is able to transport only 1.3 million tons of ore annually, so carrying 45 million tons of ore requires more than 30 ships.

According to Li Kelin, CSC president, the company is taking pains in building a large ocean-going fleet.

"We are ambitious to take on at least 50 per cent stake of the shipping volume in the future," Chen said.

(China Daily 09/04/2004 page5)