Jiangsu Shagang Group Co., China's biggest privately owned steelmaker, is seeking to buy a stake in Brazil's Cia. Siderurgica Nacional SA's iron ore unit as prices for the raw material soar to a record.
Shagang is in talks on its own, and isn't aware of interests from other Chinese companies, Shagang Vice President Shen Wenming said today. A group of Chinese steelmakers are considering bidding for part or all of Nacional Minerios SA, the Wall Street Journal said today.
Iron ore prices jumped 65 percent this year, spurring increased attempts by steelmakers to buy mines to secure supplies. CSN, as the Brazilian company is known, plans to triple output at its unit, which could be worth $2 billion.
``The Chinese steelmakers are aiming for a stable and safe supply of iron ore through taking stakes in mining companies,'' said Helen Lau, a Shanghai-based analyst at Daiwa Securities Group Inc. ``Brazilian mines are an option.''
CSN plans to bolster output at Nacional Minerios to 41 million metric tons a year by 2012, from 14 million tons this year.
The unit at present production could be valued at $2 billion, inclusive of a 30 percent to 35 percent premium, said Mark Pervan, a commodity strategist at Australia & New Zealand Banking Group in Melbourne.
CSN hired Goldman Sachs Group Inc. to evaluate a possible sale, and in May said it may sell all or part of the unit in the third quarter to cut debt and fund expansions.
It's too early to comment on the size and value of the stake under discussion, Shagang's Shen said in a phone interview. Shagang is based in Zhangjiagang, 120 kilometres (75 miles) west of Shanghai.
Baosteel Group Corp., China's largest steelmaker, rival Shougang Corp. and China's sovereign wealth fund may also be interested in a stake, Wall Street Journal said, citing an unidentified person familiar with the matter.
Chinese steelmakers are locked in price talks with Rio Tinto Group and BHP Billiton Ltd. over annual contracts for ore delivered from Australian mines. Rio and BHP, which account for half of Asia's iron ore sales, want a higher than 65 percent increase citing rising Chinese demand and the proximity of their mines to Chinese mills.
Source: Bloomberg
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