2010-08-17 10:58

A worker inspects flat-rolled steel at Wuhan Steel. [Lin Qing / For China Daily]

Steelmaker aims to jointly develop overseas projects

Beijing - China's third largest steel mill Wuhan Iron & Steel Group is in talks with ArcelorMittal, the world's largest steelmaker to jointly develop overseas mining projects to gain more raw material resources and reduce cost risks.

Peter Kukielski, head of ArcelorMittal's mining sector, visited Wuhan Steel last Thursday. ArcelorMittal is willing to work with Wuhan Steel on iron ore projects via joint development and investment, Wuhan Steel said on Monday.

Wuhan Steel spokesman Bai Fang said the two sides are still in the discussion stage and nothing has materialized yet.

ArcelorMittal has 26 iron ore mines with an annual production capacity of 51 million tons and aims to expand to 100 million tons by 2015, the statement said.

The company is looking at plans in countries including Liberia, Senegal and Mauritania, Kukielski said in March.

"Although ArcelorMittal is self-sufficient with iron ore now, they still aim to gain new iron ore resources working with Chinese steelmakers will help them to reduce risks," said Hu Kai, an analyst with consulting firm Umetals.com.

"If European economy changes and cannot digest the expansion of iron ore supplies, ArcelorMittal can transfer it to China to manage risks."

"It's a win-win situation. If Wuhan Steel is bidding for an iron ore project with competitors, the price will definitely be driven up. The joint development will help reduce cost risks for both sides," said analyst Xu Xiangchun from Mysteel.com.

Related readings:  Wuhan Iron & Steel to increase output by 24% next year  China steel maker buys rights to mine Oz iron ore  Wuhan Iron, CVG ink iron ore deal  Wuhan Iron & Steel snaps up Venezuelan ore

Wuhan Steel is a good potential partner as it has accumulated experience after years of going overseas, he said.

Wuhan Steel has been seeking to invest in more overseas iron ore assets to cut its reliance on expensive imports.

"We aim to be self-sufficient in iron ore supplies in three to five years," Deng Qilin, chairman of Wuhan Steel, said in March.

Wuhan Steel in May received approval from the National Development and Reform Commission for two overseas acquisitions in Africa that are expected to contribute nearly 2 billion tons of iron ore deposits.

Last October, Wuhan Steel agreed to buy more than 40 million tons of iron ore under a seven-year contract with the Venezuelan company at a "China Price" separate from what the big three global miners are charging.

Wuhan Steel also acquired a 21.52 percent stake in Brazilian iron ore miner MMX Mineracao e Metalicos SA for $400 million last year.

The company also received approval from the Australian government for a A$271 million ($249 million) investment in Centrex Metals Ltd in November, and also for a 60-percent stake in the iron ore rights to five Centrex projects in South Australia.