Baosteel Faces Difficult Second Half-Year

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.

Baosteel Importing Iron Ore On Short-Term Prices

Baosteel Importing Iron Ore On Short-Term Prices

Chinese steelmaker Baosteel has admitted that it is now importing iron ore on shprt-term contract.

Chen Ying, board secretary of Baosteel's listed company, Baoshan, said that his company "had settled deals with certain (price) increases with miners as of April" and would pay the price difference after iron ore talks were finalised.

Ferro Alloys Corporation Looking For Strategic Partners

Steelmakers Circle Ferrochrome Manufacturer

India’s Ferro Alloys Corporation is looking for strategic partners as the company looks to move up to the next stage.

Joint managing director Ashish K Saraf admitted to Indian TV station NDTV that his company is looking for a tie-up and that preliminary approaches have been made to steelmakers Baosteel, Posco, Vedanta, JSW, Tata Steel and Amtek Auto.

"We are actively looking to bring in strategic investors into Ferro Alloys. It could be Tata Steel, Bao Steel etc, anyone who has capacities and requirement for ferro-chrome," Mr Saraf told NDTV.
The company has also given a mandate to E&Y to look for international partners and sources suggest that part of the mandate is a sale of up to 75% of the equity in Ferro Alloys Corporation and 47% in associated company FACOR Alloys. These are the stakes held by the company’s promoters with the balance held by financial institutions, corporate bodies and the general public.

Ferro Alloys Corporation has significant chrome ore mining assets including its complex in Orissa, and this is what makes the company so attractive to steelmakers
Sources suggest that any bid for Ferro Alloys is likely to be in the region of Rs40-45 a shares – a 50% premium over the current market prices – which would value the promoter holding at around Rs600 crore (US$135 million).

Baosteel Clarifies Chairman's Comments, Re-iterates Support For Pricing System

Despite hinting earlier this week that it may back a shift to quarterly contracts, Baosteel Group Corp., China’s lead negotiator for annual ore price talks with global miners, on Friday emphasised that it supports the existing system of pricing iron ore once a year. However, the company acknowledged that the 40-year-old format could be altered.


A company media official told Dow Jones Newswires that media reports on Thursday citing Chairman Xu Lejiang's remarks – made on the sidelines of a shipping conference in Shanghai - had missed the context setting out Baosteel's support for the existing system.

"The benchmark annual pricing system was set up 40 years ago, and miners, steel mills and the market have changed a lot since then, so it is reasonable that the system has some changes and adjustments now," the Baosteel official said, repeating what he said were Xu's actual remarks.


"But Baosteel supports the long-term annual contract system. This system is beneficial for steel mills and raw material suppliers to build a long-term and stable relationship based on cooperation. It also benefits the stability and prosperity of the industry chain."

Vale Denies Aquila Default Claim

Vale SA's Australian coal unit, Bowen Central Coal, has denied it is in default over infrastructure agreements for the A$1 billion Eagle Downs coking coal joint venture project with partner Aquila Resources Ltd.

The denial follows on from Aquila's statement on Tuesday that it had issued a default notice for the JV in a dispute over infrastructure arrangements. Aquila prefers to ship from Abbot Point from 2012-13 using the 69km rail line due to be completed by 2012, however Vale preference is to use the Dalrymple port, suggesting that lower costs would offset any delay. Using Dalrymple means the project will not ship any coal until 2015.

A spokesman for Vale put the dispute down to a difference of opinion: "Vale does not agree that we are in default. We and Aquila have different views about the best logistics solution for the JV. Always acting in the best interest of the JV, Vale tried to demonstrate to Aquila our views and conclusions but unfortunately Aquila refused to accept our point of view," a Vale spokesman said.

In a note to investors Patersons Securities analyst Alex Passmore said that the dispute was “clearly not positive for Aquila's relationship with Vale." The matter is now likely to go to arbitration. Aquila has set a deadline of Friday for the issue to be resolved so that contracts for the infrastructure can be signed by the end of March.

The two companies are also partners, along with AMCI Pty Ltd, in the A$2 billion Belvedere coal project, where Aquila holds a 24.5% stake and Vale 51% and Passmore believes that both companies are jockeying for position ahead of the release of the Belvedere feasibility study that is due shortly. Vale has an option to buy out its partners in Belvedere at “fair market value in the future” according to Aquila. If Vale is found to be in default then Aquila may try to buy out its share in the Eagle Downs project. It is likely to be backed in this regard by Chinese steel maker, Baosteel, who own a 15% stake in Aquila.

Meanwhile Queensland Rail has said that the billion-dollar rail link from the Bowen Coal basin to Abbot Point will not be jeopardised if the Aquila/Vale JV does ship through Dalrymple. "We have a number of customers for the GAP project, including the Northern Missing Link, and at this stage the project remains committed to proceeding, with construction expected to start in early April," spokesman Mike Carter said.

"We have a range of customers, our project is on schedule, it's aligned to a 50-million-tonne per annum project and we'll have that ready to go in early 2012."

Baosteel Increases March Steel Prices

China’s Baosteel Iron and Steel Co has raised its March prices by up to 7.4 percent in th face of rising demand, increased costs and to recoup losses when it suspended price increases in February.

Hot-rolled coil for March delivery has increased by 300 yuan (US$44, 7.4 per cent) a ton, from February, while prices for cold-rolled products also rose 300 yuan, (5.4 percent).

The increases are within analyst expectations, given rising coke and spot iron ore prices.

Baosteel had kept February prices unchanged for most products amid speculation that this was in order to strengthen China’s position in the annual iron ore benchmark price negotiations. This current round of increases will enable it to catch up with other steel mills that did increase their prices.

Baosteel - Iron Ore Prices Unlikely To Rise Next Year

Baosteel Group Corporation (Baosteel) raised January 2010 steel prices December 10, 2009. After the price adjustment, the main product prices of Baosteel have basically returned to their high level in 2009. The action was followed by Wuhan Iron and Steel (Group) Corp. (WISCO), Anshan Iron and Steel Group and other enterprises increasing their steel prices.

Ma Guoqiang, general manager of Baosteel, said December 15, 2009 that next year in terms of steel demand and the overall price, the situation will be greatly improved compared to this year, but the overcapacity issue will remain. He also said that the world's major steel enterprises' financial situation is still not optimistic this year, and this means that the iron ore price is unlikely to rise next year.

Next year's domestic production capacity may surpass 600 million tons

Ma expected that thanks to the 4 trillion yuan economic stimulus plan, as well as investment demand in real estate and infrastructure, this year the domestic steel production capacity could reached 5.7 million tons. Judging by the just-concluded Central Economic Work Conference, next year proactive fiscal policy and moderate loose monetary policy will be continued. The national crude steel output in 2010 could reach more than 600 million tons.

He also said next year China's economic growth will rely more on domestic demand and growth in investment will be less than this year. Based on this premise, combined with reduction in vehicle purchasing tax and the possibility of continuing the home appliances to the countryside policy, the outlook for steel demand is optimistic.

Furthermore, as urbanization continues to advance, the demand for steel will be diversified, which will generate a new round of domestic steel demand. Relatively speaking, with the cooling down in investment in infrastructure, construction steel demand growth will slow in 2010.

Ma also said the situation of overcapacity will be more prominent in the next year. In his view, eliminating backward production capacity will need to rely on economic measures, but the key is to strictly enforce environmental regulations, making those iron and steel enterprises with high pollution and high energy consumption lose their cost advantage.

Ma Guoqiang said at Baosteel there will be no increase in production capacity next year, and they will continue adjusting the product structure in accordance with national requirements.

"Due to the constraints of anti-dumping by foreign countries, while China has large production capacity, the price of seamless steel pipe products in 2010 is not optimistic."

"Baosteel next year will insist on differentiation strategies and produce the relative cost-competitive products that other domestic steel mills can not produce," Ma said.

Ma said the iron ore market is a global market, so it directly relates to global supply and demand. From a global perspective, the financial situation of some iron and steel enterprises in 2009 is very difficult, and a considerable number of enterprises suffered losses or meager profits, insufficient to support the price rise of iron ore next year.

However, according to a report from ratings agency the Fitch Ratings Corporates Group, China's steel output recovery is pushing up the prices of raw materials, and the agency expects prices of raw materials to increase 15 percent -20 percent in 2010 than in 2009. Since the end of 2008, downstream operating costs of the steel company which are self-sufficiency in raw materials may have been reduced. These companies will make profits when capacity utilization rate is more than 75 percent.

Source: People's Daily

Baosteel Replaces CISA As Lead Iron Ore Negotiator

Action seems to be hotting up on the iron ore price negotiation front with steelmaker Baosteel Group replacing China Iron and Steel Association (CISA) as the chief negotiator for the Chinese side in its talks with the big three iron ore suppliers, BHP Billiton, Rio Tinto and Vale.

The negotiations, which are likely to start by the end of December, also assume significance against the backdrop of Rio and BHP further consolidating their mining operations over the weekend.

This year's iron ore price negotiations reached an impasse in June after China's chief negotiator CISA insisted on a 45 percent discount over last year's prices, after a 33 percent cut in benchmark iron ore prices had been reached by the "Big Three" with other Asian steel mills.

Chinese steel mills have since then started sourcing ore supplies from the spot market or signed individual contracts with the "Big Three", for a 33 to 28 percent cut, without revealing details.

Baosteel, the country's largest steel mill, was always at the forefront of the iron ore pricing talks since 2003, but was replaced by CISA this year as prices continued to increase.

The bitter and protracted row over the ore talks raised doubts in industry circles on whether the association was the right candidate to spearhead the negotiations.

"Next year's iron ore talks could see results, as Baosteel has several years of experience in iron ore talks. They are also capable of formulating decisions that can best encompass the prevailing market trends," said Yu Liangui, a steel analyst with Mysteel Research Institute.

During the 2007 negotiations Baosteel achieved the first price agreement of that year with Vale of Brazil, only 9.5 percent up from the previous year. Achieving the first agreement of the year was crucial, as it prevented the levels of other international agreements pushing the price up for China. This meant that in 2007, China's steelmakers achieved record profits on the back of stable and relatively low production costs.

"It would suit Baosteel better if it is able to reach a first price agreement with Vale as it is a long-term price advocator. Such a move would also be a blow to BHP, which always prefers to use the spot price to follow the long-term price," said Yu.

However, he warned that inordinate delays in fixing a price would be detrimental for Chinese steelmakers as prices may go up once the global economy starts recovering.

Baosteel is planning to replace its present chief negotiator Ding Shouhu in next year's talks, while Rio Tinto may also have a new representative, according to sina.com.

The real challenge in next year's talks would be to achieve a price that is in the best interests of all concerned. That seems to be a tough task as international analysts have predicted a 20 to 30 percent increase in iron ore prices for 2010.

The decision of Rio Tinto and BHP Billiton to merge their Australian iron ore resources is also not good news for Chinese steelmakers.

The two mining giants signed a binding agreement last week to consolidate their iron ore operations in Western Australia. Plans for the joint venture were originally announced in June and are awaiting regulatory approval.

"China will face a more serious threat if the Rio and BHP joint venture gains ground as their resource monopoly will help them in controlling capacities and prices," said Zhang Ye, vice-general manager of China National Minerals, a wholly owned subsidiary of metals trader China Minmetals.

Zhang said Chinese steel mills should look at diversifying their iron ore supplies further and also improve the negotiation tactics at the talks.

Yang Siming, chairman of Nanjing Iron & Steel Group, said benchmark iron ore prices might rise 5 to 10 percent next year. But the bigger worry for Chinese mills would be the skyrocketing ocean freight charges.

Analysts also feel that the joint moves by BHP and Rio would propel Chinese steelmakers to the industry consolidation mode.

The Chinese government has for long wanted to consolidate the fragmented industry as domestic steel firms are disadvantaged in annual international iron ore negotiations due to the low industry concentration.

The nation's iron ore imports rose 36.8 percent to 45.5 million tons in the first 10 months from a year earlier, Customs said on Nov 12.

Source: China Daily

Baosteel Celebrates Aquila Stake

A hand over ceremony between Baosteel and Australian Aquila Resources took place in Beijing Monday morning. According to the agreement, Baosteel will take a 15 percent stake in Aquila.

China's biggest steelmaker, Baosteel, was given the green light by the governments of both countries to acquire up to a 19.99 percent stake in coking coal and iron ore company Aquila Resources. The acquisition cost 286 million Australian dollars in new shares.

Luo Bingsheng, Deputy Director China Iron & Steel Association, said, "We think it should be based on the enterprise's behavior. Enterprises did this based on their requirements. We should support their work. There is one thing we want to stress, for China, the imported iron ore price must implement the unified price. The iron ore price should strictly adhere to the standard and requirement reached by Baosteel and the three largest mining companies. "

Aquila is a comprehensive mining corporation in west Australia. Its operation consists of iron ore, coal and manganese. The annual future production volume of iron ore is expected to reach 20 million tons, 6 million tons of coal and 1 million tons of manganese.

Xu Lejiang, Chairman BaoSteel Group, said, "This is not only good for Baosteel, but it also avoids risks, and creates a win-win situation for both sides pursuing long-term returns."

Dai Zhihao, the vice president of Baosteel Group will join Aquila's board. It is the Foreign Investment Review Board's fourth approval of a Chinese investment in the mining sector in the past three weeks.

Source: CCTV (video also available)

Baosteel Signs Indian Ferrochrome Contract

Shanghai Baosteel Group (Baosteel) subsidiary Baosteel Resources has signed its first foreign long-term ferrochrome contract with India's Ferro Alloys Corp (FACOR Group), Baosteel announced November 17.

Baosteel Asked To Re-Submit Aquila Bid

Baosteel Group Co, China's largest steelmaker, has been asked by the Australian government to resubmit its application to invest $240 million for a 15-percent stake in iron ore explorer Aquila Resources Ltd, the Australian media reported.

According to the Australian Financial Review, Baosteel resubmitted its application as requested by the Foreign Investment Review Board (FIRB) this week but it did not make it clear why the request was made.

Baosteel could not be reached for comment during China's national holiday.

FIRB is currently considering at least six investment proposals from Chinese state-owned enterprises, including a $3-billion bid from Yanzhou Coal Mining Co Ltd to acquire Felix Resources.

In September, Yanzhou Coal was also asked to resubmit its takeover application.

China Nonferrous Metal Mining Group Co (CNMC) was blocked from investing $222 million in rare earth miner Lynas Corp in September. FIRB ordered that CNMC's stake in Lynas should not exceed 50 percent.

Reuters cited a senior FIRB official as saying that the board preferred not to see foreign majority stakes in new mining projects.

FIRB said the Australian government's preference is for state-backed entities to take minority stakes in junior Australian miners, and that it will assess whether deals are in the national interest on a case-by-case basis.

In late August, Baosteel and Aquila agreed that Baosteel would invest up to $240 million in Aquila for up to 43.95 million new shares issued by Aquila - a 15-percent stake.

Under the deal, Baosteel will also back Aquila to gain low-cost financing from Chinese financial institutions for its major projects, including the West Pilbara iron ore project.

Tony Poli, executive chairman of Aquila, said that the deal should have no problem with FIRB after signing the agreement.

"They (Baosteel) have no control over the company, will appoint one director to the board. The strategic cooperation is all about assisting Aquila," Poli was cited by the Australian media as saying.

Source: China Daily

Baosteel Wants Stake In Minas Rio Iron Ore Mine

Baosteel, China's largest iron and steel conglomerate, wants to forge an alliance with Anglo American, the mining company that rejected a merger approach from rival Xstrata in June.

Baosteel has tabled a proposal to pay £1bn for a 30% stake in Anglo's huge Minas Rio iron ore mine in Brazil, which it acquired last year for £3.7bn.

If Anglo agrees a deal with Baosteel, the Chinese company could help it fend off bids from predators such as Xstrata, which was told last week by the City's Takeover Panel to make a formal bid for Anglo by 20 October or walk away.

Baosteel, which is based in Shanghai, employs 112,000 staff and generates annual revenue of $21.5bn (£13.5bn). It is keen to expand internationally and has been exploring opportunities in Africa and Asia as well as South America.

Anglo has made it clear that it is seeking a partner to help develop Minas Rio, which is expected to produce more than 35m tonnes of iron ore by 2011. Production could rise by another 50% within a decade. Two other companies are understood to have contacted Anglo about buying a stake in Minas – the Bahrain-based Gulf Industrial Investment Company and Sojitz, a Japanese conglomerate. But Baosteel is understood to be the frontrunner.

Latin America is Anglo's fastest growing region and this week the group will take shareholders and analysts to Brazil and Chile to review its operations there. The trip is being seen by the company as an "opportunity to showcase Anglo's most attractive assets and to outline future growth prospects". Observers believe Anglo's management want to emphasise the "hidden value" within the company to underline their opposition to Xstrata's proposal for a nil-premium merger, which would create a company worth £40bn.

Anglo's shareholders have made it clear to new chairman Sir John Parker, who took over from Mark Moody-Stuart in August, that Xstrata's offer is unacceptable because of the absence of any takeover premium. Insiders say Parker is implacably opposed to a deal with Xstrata on the basis of the terms outlined four months ago.

Xstrata, led by Mick Davis, is under pressure to add a cash component to any future offer for Anglo, but will need to raise funds via a rights issue to make additional cash available. If Xstrata can find the money for a premium, shareholders are likely to force Anglo's management into talks. However, that would require Xstrata to find up to £10bn and analysts are sceptical that the Anglo-Swiss firm can raise that amount. "It is hard to see how they can get funds to provide a premium, so the deal must be as good as dead," one analyst says.

Xstrata's net debt stands at about £7.5bn, against a market capitalisation of £25.5bn. It has already raised £4.1bn in a rights issue this year, which could restrict its future capital-raising potential.

Source: The Guardian

Steel Prices "Will Recover On Healthy Demand"

Baoshan Iron and Steel Company, China's largest steel maker, says that it expects steel prices to recover from recent declines because of increasing demand from manufacturers.

There was "healthy" demand and the global economy was on the path of recovery after its "most difficult period", Baoshan president Ma Guoqiang said yesterday.

Benchmark Chinese steel prices have dropped 13% since August 4 after gains this year led buyers to run down stocks. Baoshan Steel's profit would rise "significantly" in the second half from the first six months as demand and prices recovered, vicepresident Chen Ying said.

"The most difficult period for the world economy has gone," Ma said. "The economy will recover next year, although the pace won't be fast."

There is strong steel demand from the car, appliance, machinery, oil tanker and power grid industries, and orders for Baoshan were "good".

Baoshan said last Friday that first-half profit plunged 93% because of the economic slowdown. The company is running at full capacity utilisation, Ma said. Baoshan plans to raise output of stainless steel "moderately" in the second half, Chen said.

China's steel output reached a record in July and prices have soared as much as 38% since the government announced a 4-trillion yuan (586bn) stimulus package in November.

The state council, China's cabinet, said last Wednesday that it was studying curbs on overcapacity in industries including steel and cement.

Industry minister Li Yizhong ordered the steel industry to refrain from expanding capacity earlier this month. Mills have the capacity to produce 660-million tons of steel each year and there was demand for 470-million tons, he said.

Source: All Africa

China Needs To Limit Spot Purchases

China, the world’s largest iron ore consumer, needs to limit supplies of the material sold on the cash market as talks to settle contract prices stalled, Baoshan Iron & Steel Co. said.

The nation should reduce the number of its steelmakers to improve their bargaining powers with iron ore suppliers, Baoshan Steel President Ma Guoqiang said today in an online conference. Talks to settle prices with BHP Billiton Ltd., Rio Tinto Group and Vale SA are ongoing, Baoshan Vice President Chen Ying said.

The China Iron & Steel Association last month accused mining companies of encouraging “speculative” prices by increasing iron ore sales on the spot market. The association wants BHP, Rio and Vale to agree to a 35 percent price cut on annual contracts, which it wants as a Chinese benchmark.

Shanghai-based Baoshan Steel will buy iron ore at provisional price levels should the talks not lead to an agreement by Dec. 31, Chen said.

Rio Tinto, the world’s second-largest iron ore supplier, has offered a 33 percent price cut, which has been accepted by some Chinese customers as a provisional price until talks settle, Umetal Research Institute said in July. Fortescue Metals Group Ltd., Australia’s third-biggest ore supplier, agreed to a 35 percent price cut with China this month.

“Fortescue is a new iron ore supplier and its products account for a small portion of Baoshan’s needs,” Ma said.

State-owned Baosteel Group Corp., the parent of Baoshan, will continue to follow the lead of the China Iron & Steel Association, Ma said. Baosteel was previously the main Chinese negotiator for iron ore price talks before the steel association took over for this year’s contract.

Baoshan has enough ore to meet its requirements from long- term contracts, Ma said.

Source: Bloomberg

Baosteel Take Stake In Aquila

Western Australia-based explorer and producer Aquila Resources Ltd has reached a strategic co-operation agreement with the Chinese steel giant Baosteel to develop its iron ore, coal and manganese projects.

Under the deal, Baosteel will take up to 15 per cent of Aquila, investing up to $286 million in return for as many as 43.95 million shares in Aquila.

Baosteel will work with Aquila to develop the Australian company's steel raw materials projects, including iron ore, coal and manganese.

"The strategic co-operation that has been established by the signing of these two agreements is expected to deliver significant long-term benefits for both Aquila and Baosteel, and significant benefits to both Australia and China," Aquila said in a statement on Friday.

"This is a transforming event for Aquila. China's largest steelmaker has established a strategic cooperation with Aquila, not only to make a major investment in the Company, but also to advance participation in some of the important projects in the Company's portfolio.

"For Baosteel, this represents its first major international strategic investment in a public company and is an important transaction in Baosteel's strategy to secure long-term supply of critical steel raw materials for its steel making business."

Under the deal, Baosteel will take up to 15 per cent of Aquila by paying as much as $285.6 million for as many as 43.95 million shares at $6.50 per share.

Aquila's shares shot up when they resumed trading on the Australian stock exchange on Friday, following the release of the statement, rising 73 cents, or 11.15 per cent, to $7.28 by 1013 AEST.

Aquila said Baosteel would work with it to source low cost financing from Chinese financial institutions for its major projects, and Baosteel would get preferential opportunity to invest directly in and develop those projects.

Baosteel vice president, Dai Zhihao, has been nominated to join the Aquila board.

The deal depends on regulatory approvals both in Australian and China, including from the Foreign Investment Review Board.

Aquila said the placement with Baosteel would give it "significantly greater capacity to accelerate (its) steel raw materials asset portfolio.

"This is an important step in executing Aquila's vision to become one of Australia's leading globally diversified steel raw materials producers," the company said.

Aquila is a minerals explorer focussing on coal and iron ore in Australia and overseas.

Aquila also produces coal from its Isaac Plains Project in the Bowen Basin, in central Queensland.

Aquila said the Baosteel deal would underwrite the delivery of key projects in iron ore, metallurgical coal and manganese.

Projects include West Pilbara in WA and Thabazimbi, in South Africa (both iron ore), three coal projects at Isaac Plains, Eagle Downs and Washpool, in Queensland, and the Avontuur manganese project, also in South Africa.

The deal will deliver "significant new supplies of iron ore, coking coal and manganese" to Baosteel.

"The involvement of Baosteel now paves the way for Aquila to pursue its strategic vision in drawing together supply through its interests in the West Pilbara Iron Ore Project and shipping through the planned Anketell Port," Aquila said.

"Aquila and Baosteel will work towards establishing a joint sales arrangement to assist in the distribution of the Company's, and potentially Baosteel's share of production, from these key projects throughout the Peoples Republic of China.

"Aquila and Baosteel have also agreed to work towards the establishment of long-term raw material off-take arrangements from these projects, once they are developed and in production."

Source: WA Today

Baosteel Wins 35 Per Cent Cut In Fortescue Iron Ore Price

Baosteel Group Corp., China’s largest steelmaker, and other Chinese mills won a 35 percent reduction in iron ore prices from Australia’s Fortescue Metals Group Ltd.

The Chinese mills will pay 94 U.S. cents a dry metric ton unit for fines, the most commonly traded product, Shan Shanghua, the secretary general of the China Iron & Steel Association said today at a press conference in Beijing. The price agreement will apply for the second half of 2009, he said.

China had sought a discount of as much as 45 percent this year, more than the 33 percent offered by Rio Tinto Group, arguing it should enjoy a bigger cut as the largest buyer. The announcement follows the formal arrest of four Rio executives, including Australian Stern Hu, head of the company’s iron ore business in China, last week.

The price for lump iron ore will be 100 cents a dry metric ton unit, or 50 percent lower, Shan said.

Source: Bloomberg

Baosteel Raises August Prices

China's Baoshan Iron and Steel Co Ltd (Baosteel) has raised August prices for its major products by 9 to 13 percent versus the July tags, higher than market expectations, trade sources said on Monday.

Baosteel, the listed unit of China's largest steelmaker, has raised the price of straight-carbon hot-rolled steel coil by 350 yuan ($51.23) per tonne, while increasing the price of low-carbon hot-rolled steel coil by 500 yuan a tonne.

The company also raised the price of cold-rolled steel coil by 500 yuan a tonne, trade sources said, adding that they were surprised by the price hikes.

"I think it could mean that Baosteel has agreed to follow the price cut that Rio Tinto and Japanese steel mills signed." said Cui Jingyi, analyst at Guotai & Junan Securities.

"Previously some some steel mills held back the price hikes to prevent any negative influences on the iron ore price negotiation, and now the picture is clear for them to make their price adjustments," she said.

"Additionally, we have seen some recovery on domestic demand and exports, which offered enough excuse to the steelmakers to raise their prices," she added.

Steel prices in China have awaited cues from iron ore price negotiation with global major miners, with China seeking to pay less for imported iron ore this year than other countries.

The China Iron and Steel Association wants Rio Tinto, BHP Billiton and Vale, the companies that control most of the global iron ore trade, to cut prices back to 2007 levels, which would mean a deeper cut in 2009 prices than many other steel mills have accepted.

Source: Reuters

Vale 'Floats' 10 Percent Iron Ore Price Cut

Reports from China suggest that the Brazilian miner Vale, has floated the idea that it could accept a 10% reduction in this year's iron ore contract prices, a Shanghai-based analyst with sources in the Chinese steelmaker Baosteel, said Wednesday.

Baosteel is representing Chinese steel mills in the annual contract price negotiations with leading miners, but the Chinese steel industry and the world's top three iron ore miners - including Vale - remain way apart on their views about the level and method of pricing for 2009, the analyst said.

The two sides concluded their latest round of talks over the weekend in Shanghai without making much progress, industry sources said, and negotiations aren't expected to resume until after the Lunar New Year break next week.

Analysts with sources close to negotiations say actual prices have not been seriously broached. Vale's willingness to reduce prices by 10% was likely floated to the Chinese side before the latest round of talks, but the Shanghai analyst said even that figure was cast as a rough ballpark rather than a formal proposal. Vale officials in Beijing couldn't be contacted for comment.

A 10% reduction in 2009 prices is still a far cry from the 40% drop that Chinese negotiators have demanded, the Shanghai analyst said adding that Australian miners Rio Tinto PLC and BHP Billiton Ltd. have not come up with any price references.

BHP strongly backs a move away from a benchmark contract price to an "index-linked" pricing mechanism, privately tailored for BHP, that more closely tracks spot price movements.

Only Rio met Baosteel and association officials at the latest talks held last Saturday and Sunday in Shanghai, the source said. Vale and BHP did not appear to have followed up on scheduling meetings this week and have appeared reluctant to speed talks up, analysts said. "The miners, especially Vale, have not been very eager to meet," said a Beijing-based analyst, also following the talks with sources close to Chinese companies. "The impression is that they'd rather wait for the economic environment to improve."

If demand recovers in the steel industry, it would weaken the Chinese hand in demanding aggressive cuts in ore benchmark prices this year.

The negotiations have also been slowed by a rift among Asian mills on the Chinese push to have the new contract backdated to start on Jan. 1, rather than the conventional April 1, another Beijing-based analyst said.

The China Iron & Steel Association has been a vocal advocate of an earlier start date. If the Chinese lock in lower prices, the new start date would cancel three months of hefty price increases they awarded the miners in last year's contract.
But Japanese and Korean mills oppose the earlier start date on the ground that the demand may be exploited by miners to extract other concessions from steel mills.
Steel mills will benefit from an earlier start date, but they want to retain the benchmark system, citing its predictability, and they fear the Chinese drive to change the start date allows BHP an opening to force through an index-linked system.
BHP has reportedly been willing to discuss the Chinese proposal for an earlier start date on the condition that Chinese mills replace the benchmark system with an index-linked system.

A report in the Australian Financial Review quoted Tom Price, a Merrill Lynch analyst close to the talks, as saying that Rio and Vale would be unlikely to accede to an earlier start date.

The CISA Secretary General, Shan Shanghua, has also opposed the "index-linked" system, saying it is open to manipulation.

Source: Easybourse, Dow Jones

Baosteel, Vale Abandon Brazil Joint Venture

Baosteel has abandoned a proposed joint venture to build a steel mill with Brazilian mining firm CIA Vale do Rio Doce due to the weak steel market and local opposition.

Both companies have now decided to liquidate Companhia Siderrgica Vitria (CSV), the joint venture set up for the project.

Chen Ying, secretary of Baosteel Ltd, said she could not comment as the decision was made by the parent company Baosteel Group.

Baosteel and Vale had signed a plan in August 2007 to build a five-million-ton steel slab plant in the southeastern Brazilian state of Espirito Santo with Baosteel holding an 80 percent stake in the joint venture. Construction on the plant was expected to start early this year with production planned for the end of 2011.

The plant was to be close to local iron ore deposits and savings were expected to come from not having to ship raw materials to the plant. Shipping costs from Brazil to China reached as high at USD108 per tonne in the middle of last year, though the level has now fallen to less than USD15 per tonne.


As well as the falling demand for steel worldwide the project, which would have generated 4,500 jobs, has also encountered Brazilian opposition due to its possible threat to local environment. The state government in Espirito Santo had wanted the two companies to relocate the plant for environmental concerns.

Source: Xinhua; China Daily