China mills demand 2007 iron ore prices – Shougang
miningweekly.com
By: Reuters
11th March 2009
BEIJING - Shougang Iron & Steel, China's sixth-largest steel maker, said on Wednesday Chinese steel mills would only accept global iron ore prices close to the 2007 level, which would give both miners and steel firms reasonable profit margins.
Chinese steel mills and big global miners are in annual talks to set term iron ore prices. Chinese steelmakers say the miners are dragging their feet, hoping for demand to recover.
"I think, first of all, we can only go to discuss precise prices on the basis of the 2007 price level," Shougang Group chairman Zhu Jimin told reporters.
That implies a 50 percent cut, since last year prices from top ore suppliers BHP Billiton, Rio Tinto and Vale almost doubled.
"The price should give miners some profit room for their sustainable development, and it should also be in a range the steel mills can bear. A price that hurts the interest of one side will lead to disorder in the industry," he added.
China's steel sector, the world's biggest, has been hit hard by the global slowdown because demand for ships, cars and building work has fallen sharply.
Beijing is encouraging the fragmented sector to coalesce into a few regional champions, with upgraded plants in coastal regions where they have better access to overseas markets.
Although it has not offered direct aid to steel mills, it is offering indirect help through a 4 trillion yuan ($585 billion) stimulus package. And it is also urging companies to invest abroad while commodity and asset prices are low.
Shougang is following the programme closely.
It bought about 40 percent of Australian miner Mount Gibson Iron Ore Ltd in December through two of its Hong Kong-listed subsidiaries -- Shougang Concord International Enterprises Co Ltd and APAC Resources Ltd.
Zhu said his firm had no plans to buy more of Mount Gibson, but it does plan to invest $700 million to $1 billion in its Peruvian iron ore mining project, Shougang Hierro Peru.
Under the stimulus plan, Shougang recently won a contract to supply 310 000 t of steel, part of a 500 000-t deal for oil and gas pipeline construction, Zhu said.
Steel firms will also benefit from China's plans to expand its railway system and machinery industry, Zhu said.
NEW PLANT
Shougang, which produced almost 12.2 million tonnes of crude steel last year, will soon launch operations at its Caofeidian joint venture plant, a state-of-the-art mill on the coast of northern Hebei province near Beijing. The mill is 49 percent owned by Tangshan Iron & Steel.
Caofeidian will start running in April at half capacity, 4.85 million tonnes a year, and will reach its full capacity of 9.7 million tonnes of high quality steel by the end of 2010, Zhu said.
Shougang is also in takeover talks with Shanxi-based Changzhi Iron & Steel and Guigang Special Steel, Zhu said, adding the company was in the due diligence stage.
Changzhi Iron & Steel has an annual capacity of 4 million tonnes and Guigang Special Steel has less than 1 million tonnes.
Commenting on the steel price trend, Zhu said a real price rebound would not happen until the second half of the year, when he expected more of the government's stimulus policies to take effect and the global economy to start looking up.
An uptick in steel prices and exports at the start of this year cheered the gloomy commodity markets, with some traders seeing the chance of a return of Chinese demand thanks to the economic stimulus package. |
