Saturday, 27 Aug 2011
Reuters reported that a bold push by China into iron ore projects in Africa and elsewhere will increase its access to supply and may help moderate prices but will only slowly reduce its dependence on the three companies that dominate the market.
About 85% of the imports of the raw material to make steel came from only four countries Australia, Brazil, India and South Africa. Beijing has stepped up its campaign to break that dependence by investing in mining projects in places such as West Africa where it has agreed on a spate of joint ventures and is seeking other deals including a proposal to swallow a whole company. These projects could produce up to nearly 250 million tonnes of ore annually in the medium to long term.
Analysts said but even if China secures and fully develops all these proposed projects and it will struggle to cut its reliance on the Big Three. The new projects will take many years to achieve full production while the majors each have their own ambitious expansion projects which will help reinforce market dominance.
Mr John Meyer a mining analyst at investment bank Fairfax said "These projects have little chance of displacing production from the major producers such as Rio, Vale and BHP who are so far ahead in terms of infrastructure, capital expenditure and quality of resources."
He said that "The Chinese are looking to become involved but they simply don't own the licenses to the world largest iron ore projects. China has had a fraught but symbiotic relationship with the majors and vowing to cut its dependence on them after failing to persuade them to offer big price discounts during the global financial crisis.”
The Chinese government has encouraged steelmakers such as Baoshan Iron and Steel and Wuhan Iron and Steel to gain more control over foreign iron ore. Wuhan and its third largest has vowed to become self sufficient by 2015.
Mr Li Xinchuang deputy secretary general of China Iron Steel Association said "China currently owns less than 10% of imported iron ore. We should seek 50% of ore from Chinese invested overseas resources in the next five to 10 years."
He said China would be able to break the hold of Rio, Vale and BHP on supply and pricing only if it can source half its overseas ore from Chinese-invested mines.
The icy relationship appeared to thaw in 2009 when China state owned Chinalco and Rio Tinto agreed on a USD 19.5 billion tie up but later that year Rio spurned the deal. China was bitter about the break up but later the two agreed a major joint venture to develop Rio massive Simandou iron ore project in Guinea.
Chinese industry officials also have accused the companies of monopolistic practices after Rio, Vale and BHP decided to abandon an annual pricing system in favor of a more flexible index based quarterly system last year.
(sourced from Reuters)
Reuters reported that a bold push by China into iron ore projects in Africa and elsewhere will increase its access to supply and may help moderate prices but will only slowly reduce its dependence on the three companies that dominate the market.
About 85% of the imports of the raw material to make steel came from only four countries Australia, Brazil, India and South Africa. Beijing has stepped up its campaign to break that dependence by investing in mining projects in places such as West Africa where it has agreed on a spate of joint ventures and is seeking other deals including a proposal to swallow a whole company. These projects could produce up to nearly 250 million tonnes of ore annually in the medium to long term.
Analysts said but even if China secures and fully develops all these proposed projects and it will struggle to cut its reliance on the Big Three. The new projects will take many years to achieve full production while the majors each have their own ambitious expansion projects which will help reinforce market dominance.
Mr John Meyer a mining analyst at investment bank Fairfax said "These projects have little chance of displacing production from the major producers such as Rio, Vale and BHP who are so far ahead in terms of infrastructure, capital expenditure and quality of resources."
He said that "The Chinese are looking to become involved but they simply don't own the licenses to the world largest iron ore projects. China has had a fraught but symbiotic relationship with the majors and vowing to cut its dependence on them after failing to persuade them to offer big price discounts during the global financial crisis.”
The Chinese government has encouraged steelmakers such as Baoshan Iron and Steel and Wuhan Iron and Steel to gain more control over foreign iron ore. Wuhan and its third largest has vowed to become self sufficient by 2015.
Mr Li Xinchuang deputy secretary general of China Iron Steel Association said "China currently owns less than 10% of imported iron ore. We should seek 50% of ore from Chinese invested overseas resources in the next five to 10 years."
He said China would be able to break the hold of Rio, Vale and BHP on supply and pricing only if it can source half its overseas ore from Chinese-invested mines.
The icy relationship appeared to thaw in 2009 when China state owned Chinalco and Rio Tinto agreed on a USD 19.5 billion tie up but later that year Rio spurned the deal. China was bitter about the break up but later the two agreed a major joint venture to develop Rio massive Simandou iron ore project in Guinea.
Chinese industry officials also have accused the companies of monopolistic practices after Rio, Vale and BHP decided to abandon an annual pricing system in favor of a more flexible index based quarterly system last year.
(sourced from Reuters)
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