Steel makers seek steady ore supply
(Xinhua)
Updated: 2004-04-20 15:06

Four Chinese leading iron and steel makers have signed a landmark deal with BHP Billiton, the Australia-based iron ore producer, to acquire 40 percent shares of an iron ore field of the Australian company.

They will have a steady annual supply of 12 millions tons of ore in the 25-year period, according to the deal which was valued at US$9 billion, the largest such contract by Chinese steel companies with a foreign supplier partner.

The deal was also BHP Billiton's largest ever commercial agreement with Chinese steel mills, in which both sides will divide shares of the Wheelarra Joint Venture, which the Australian company currently owns.

According to sources of Tanggang, one of the four companies to own 10 percent of shares and have 3.5 million tons in annual supply, China usually imported iron ore US$3.5 to 4 higher per ton than Japan. Although the country has outranks Japan in annual iron ore import, ranking first in the world, it has little say in iron ore trade worldwide for relatively small purchases by many Chinese steel companies.

The partnership between Chinese and Australian companies would ensure a stable, long-term supply of iron ore to the Chinese mills, which are Wuhan Iron and Steel (Group) Corporation, Maanshan Iron and Steel Company Limited, Jiangsu Shagang Group Co., Ltd. and Tangshan Iron and Steel (Group) Co., Ltd.

Under the joint venture deal, the Chinese steel mills will hold 40 percent of shares of Jimblebar Mine under the BHP Billiton, near Newman in Western Australia.

The landmark deal showed Chinese steel companies are ambitious to break price monopoly over iron ore by a few foreign giant suppliers through cooperating with a foreign partner to mine iron ore overseas on themselves. This proved effective with the successful attempt by the union of the four Chinese major steel makers, the first ever of its kind in China, industrial experts said, noting that the four companies have since secure a long-term, good quality and stable source of raw materials.

Experts said that Chinese companies can do better in mining ore overseas for their future stable supply strategies. Currently iron ore mined by Chinese companies overseas accounts for only 21 percent of the total imported iron ore, and this proportion was expected to rise further in the near future.

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