Company Looking for Alternative Iron Ore Sources
The chairman of the group company of Baosteel, China’s leading steel manufacturer says that the Chinese steel sector is likely to face difficulties in the second half of the year amid a slowdown in the real estate sector.
Speaking on the sidelines of an industry conference in Beijing, Xu Lejiang told reporters "In the second half of the year it is uncertain whether the yuan will appreciate, whether interest rates will rise.
"There is also the property market, and fixed asset investment could also fall."
Real estate development in China saw Chinese steel mills through the global economic crisis against a steep fall in exports but the government is trying to keep a lid on surging property prices and is set to legislate against speculation.
But the industry has also been affected with raw materials costs also rising and with the three global mining giants, Rio Tinto, BHP Billiton and Vale moving to quarterly prices against annual contracts.
The China Iron and Steel Association (CISA) said at a press briefing earlier this month that mills were now free to secure their own individual deals with their suppliers and Mr Xu confirmed Baosteel was currently sourcing iron ore from foreign miners on a temporary price basis, however he warned the conference that the advantages currently enjoyed by the big thre miners were unlikely to last.
"Across the world, iron ore isn't a scarce resource but it's just that in recent years, the ability to supply iron ore has not matched the development of the steel industry, especially the Chinese steel industry," Mr Xu said.
The three miners have been able to exert considerable control over the volumes of new iron ore reserves available to the market but their high price demands would push steel mills to develop alternative supply sources, he added.
"In two or three years the demand and supply situation will see a big improvement," he added.
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