Sinosteel, Anshan To Continue Investing In Australia

Move Comes Despite 40 per cent Tax

China's large steel makers, Sinosteel and Anshan Iron and Steel Corp, say they are willing to continue to invest in Australia, despite a proposed 40 percent tax on the profits of Australian mining companies.

Speaking at a conference in Beijing on Monday, Sinosteel president Huang Tianwen said "We are reviewing how the tax will impact our companies, and undoubtedly, it will affect costs and profits in our local projects," however the company is still committed to exploring overseas resources.

Bai Jingpu, vice-president of Anshan Steel, also said the company is evaluating and analyzing the impact of the "super tax" on the Australian mining industry, but he also added that the company will continue to invest in the country.

Australia’s tax plan for miners was released last week and is expected to start in July 2012. Some Australian companies have criticised the plan saying it will adversely affect future projects in the country. Xstrata Copper has already announced that it is to shelve future plans for projects in northern Queensland.

However, Chinese steelmakers companies are looking to secure raw material supplies, particularly in the light of huge increases in raw materials and a shift from annual to quarterly contracts by the big three global iron ore miners, BHP Billiton, Vale and Rio Tinto.

Sinosteel and Anshan already have projects in Australia. Sinosteel bought iron ore company Midwest in 2008 while Anshan steel has a stake in Ginadalbie Metals Ltd with whom it is developing the Karara iron ore project in Western Australia.
China’s iron ore imports grew by 11.6 per cent in the first four months of this year compared to the corresponding period in 2009.

Northern Energy Lands Chinese Deal For Colton Mine

Mine Will Sell 65 Per Cent Of Output To Chinese Mill

Australia’s Northern Energy Corporation has agreed a multi-million dollar deal with the Xinyang Group in China to sell 65 per cent of coking coal mined at its Colton mine near Maryborough in Queensland over the next 10 years.


At current coking coal prices the agreement would result in $700 million revenue to Northern Energy over the next 10 years.


The company will issue 16 million shares to Xinyang, raising $23 million to develop Colton and securing 100 jobs anticipated at the site.


Northern Energy expects to mine 500,000 tonnes a year of coking coal for each of the next eight to 10 years, although the possibility of extending the life of the mine was not being ruled out.


“The agreement with Xinyang provides us with the capital to take the next step in the development of Colton while retaining 100 per cent of the project as we fully evaluate the size of the Maryborough resource base and the potential for further mine expansion,” managing director Keith Barker said.


“The size of the resource identified to date has exceeded our original expectations and the ongoing evaluation work provides us with confidence that additional resources will be defined which will in turn enable us to ultimately increase production beyond the 500,000 tonnes per annum currently planned. Expansion of production will require additional mining lease areas and will be subject to a separate approval process to that applicable to Colton.”

China To Close Down Outdated Industrial Capacity

Measure Aimed At Cutting Pollution

China’s cabinet, the State Council, announced on Tuesday that it will continue to shut down outdated industrial capacity to reduce pollution, save energy, and upgrade industry.

The industrial sectors affected include power, coal, steel, cement, non-ferrous metals, coke, paper making, tannery and printing and dyeing, according to the statement.

The statement said that by the following are expected to close by the end of 2010:
• more than 50 million kilowatts of small coal-fired power generators
• 8,000 small coal mines which are lacking in safety standards, or are not what it described as "environmentally friendly".
• coking coal makers with a coking chamber height of less than 4.3 metres
• mill furnaces below 6,300 kilovolts in the ferro-alloy s and calcium carbide

Steelmaking furnaces smaller than 400 cubic metres will be shut down by the end of 2011 and the statement added that the government will also close outdated capacity in the construction materials, light industry and textile industry sectors.

The government has been stepping up the shutdown of outdated production capacity with 21.13 million tonnes in the iron-smelting industry, 74.16 million tonnes in the cement industry and 18.09 million tonnes in the coke industry all being phased out.

Iron Ore Talks "Pointless" - Chinese Steel Chief

China Will Have To Accept Near-Doubling Of Iron Ore Price

The chairman of one of China’s largest private steel company has described his country’s talks with the large iron ore miners as “pointless” in the wake of Japanese steel mills’ acceptance of rises of more than 90 per cent for the raw material.

Speaking in a telephone interview with Bloomberg, Shen Wenrong, chairman of Jiangsu Shagang said that Chinese steelmakers will have to accept the higher terms that Brazilian miner Vale SA has negotiated with Japanese steelmakers. Earlier this week Vale agreed a price of $106 per tonne, up 92 per cent over last year’s price, however unlike in previous years were prices were agreed for the period from April to March the current price will only run to the end of June and will be reviewed on a quarterly basis. Vale says that 97 per cent of its customers have now accepted quarterly price contracts.

“We have no options,” said Mr Shen, “Iron ore prices have gone too far. We have to accept it, although we can’t afford it.”

Meanwhile, the World Steel Association has asked regulators to probe what it described as an “oligopoly” among iron ore miners and the China Iron and Steel Association said it will hold an emergency meeting to discuss the issue.
Chinese steelmakers are still discussing their price. He Wenbo of Baosteel, which is leading the talks on behalf of his industry, said yesterday “the negotiations are very difficult.” Some smaller Chinese steelmakers have reached private deals with the iron ore miners.

The knock-on effect of higher iron ore prices looks to have been felt already. Lakshmi Mittal of ArcelorMittal said this week that he expects steel prices to rise by 21 per cent this year as a result of increased raw material costs.

Chinese Steelmakers Still Want Long-Term Prices

Producers Yet To Agree To Quarterly Pricing

Chinese steelmakers say they have yet to agree to move to a short-term pricing mechanism for their iron ore supplies, despite steelmakers in other Asian countries agreeing to quarterly contracts.

Earlier this week, both BHP Billiton and Vale announced that major steelmakers in Japan and Korea had agreed to move to shorter-term contracts for the April to June quarter, based on prices in the sport market. Previously, prices were agreed on an annual basis from April to March each year. Prices to steelmakers in those countries have increased by almost 100% over 2009-10 price.

However, Luo Bingsheng, vice president of China Iron and Steel Association said that the long-standing tradition of annual contracts brings stability to the industry and that steelmakers in China would oppose any move to quarterly pricing. Meanwhile the Chinese government has backed its steelmakers with Jia Yinsong, an inspector from the Ministry of Industry and Information Technology's Raw Material Division, telling reporters at the China Iron Ore Conference this week: "We will certainly support long-term prices."

Mr Jia said that spot prices for iron ore will cause operational risks for companies, a risk for the industry as a whole and a credit risk.

Mr Jia added that he is concerned about the high inventories of Chinese iron and steel producers. The average profit margin for members of the China Iron and Steel Association was only 2.2 percent in 2009 and if iron ore prices double under the 2010 agreement this will push the entire industry into the red. Li Xin, head of the China Metallurgical Industrial Planning and Research Institute said that steelmakers would then be forced to pass price rises on to their customers, which will lead to higher costs for manufacturers of items such as automobile, consumer electronics and home appliances.

Commenting to the Chinese newspaper, People’s Daily, Mr Li said that Chinese steelmakers must break the stranglehold that the three largest iron-producers have on the industry. Chinese steel producers must go abroad, "If Chinese steel producers can control over 300 million tons of annual iron ore output abroad, the trend will be reversed," he said.

China Coal Imports To Exceed 30 Million Tons

Coking coal imports by China, the world’s biggest steelmaker, will exceed 30 million metric tons this year as domestic supplies can’t keep pace with demand from mills; so said Teck Resources Ltd, CEO Don Lindsay at a conference in Singapore.

With Chinese steel output continuing to rise, demand for coking coal will also increase. China’s coking coal imports rose five-fold in 2009 from 6.85 million tons to 34.4 million tons after the government closed smaller coal mines in the wake of a number of high-profile mining accidents.

“China is hungry for commodities on an unprecedented scale,” said Mr Lindsay. “Domestic supply of high-quality coking coal required will not be able to keep pace with steel production growth.”

Teck Resources is the second-largest seaborne shipper of coal and wants to boost coking coal output by 50 percent within five years, Mr Lindsay said.

Iron Ore Miners, Steelmakers Moving Away From Annual Contract

London’s Financial Times newspaper reports on Monday that iron ore miners and Japanese steelmakers have reached a tentative agreement to adopt short-term contracts linked to the spot market, bringing to an end the 40-year old annual benchmark system.

"There is an understanding on both sides to move to quarterly pricing," the newspaper quoted a source involved in the talks as saying. The source added that a final deal will be settled in a matter of weeks.

Reuters confirmed sources in Asia as saying that negotiations were continuing about a move to quarterly pricing.

"Korea, Japan and China have received 90-100 percent hike offers based on quarterly systems from miners, which Japanese steelmakers seem to move toward accepting," a source at a large Asia steelmaker close to the negotiations said.

One sources suggested that Japanese steel mills are ready to accept the change as they are more concerned about security of supply than prices and are seeking to safeguard tonnage rather than prices.

Current spot iron ore prices are trading at twice the level of the 2009 benchmark.

A move towards quarterly coking coal contracts was announced earlier this month and analysts expect iron ore to adopt a similar system.

Nomura Predicts 70 Per Cent Iron Ore Contract Rise

Investment bank, Nomura Holdings, has predicted a rise of 70 per cent in the iron ore contract price for 2010 as producers seek agreements closer to current spot prices. The bank had previously a rise of 50 per cent. The firm’s London-based analysts, Paul Cliff and Gavin Wood, also predicted that within the next two years contract prices for both iron ore and coking coal are likely to double.

“Recent comments from both Rio Tinto and Vale suggest that contract prices must be settled much closer to spot prices or the benchmark pricing system will not survive,” Mr Cliff and Mr Wood wrote. “The iron ore market remains one of the only major commodity markets with such a large discrepancy between spot and annual contract prices and we think convergence is inevitable.”

Predictions for the iron ore benchmark price, which is agreed between Chinese steelmakers and the world’s largest iron ore miners, BHP Billiton, Rio Tinto and Vale, have varied between 20 per cent and 90 per cent. Japanese and Korean steelmakers have already agreed a 35 per cent rise, but with spot prices advancing there are suggestions that the benchmark price with China will see an even greater increase.

Meanwhile Australian analysts at Goldman Sachs JBWere Pty said yesterday that the big three miners were missing out on $20 billion worth of sales by not selling Australian-mined ore at cash prices. “We cannot understand why any producer would not look to urgently and decisively aim to receive the market price,” Goldman Sachs JBWere analysts led by Neil Goodwill said in a report yesterday. “Neither company is receiving anywhere near market prices for its iron ore.”

Goldman based its calculations on a $50 a tonne differential between contract prices and spot prices on 400 million tonnes produced each year in Australia.

Hebei Iron and Steel Suggests Unified Iron Ore Price

Reports from China suggest that a proposal has been put to the Ministry of Industry and Information Technology (MIIT) that a national iron ore company be formed to centralise imports.

The report, in the People’s Daily quoting the website sina.com.cn, suggests that a senior executive from Hebei Iron and Steel Group, China’s second-largest steel mill, has made the proposal that the country’s 16 largest steel mills band together to form the new company, which would unify import prices and distribute iron ore according to its ownership ratios. The move – bringing together mills with a production capacity of 10 million tons a year – would enhance China’s bargaining power with the large iron ore miners.

Hebei Steel Vice-General Manager Tian Zhiping, said on Monday that he was unaware of any such proposal.

Last month, the vice-president of the China Iron and Steel Association, Luo Bingsheng, said that reducing the number of licensed importers and promoting the agent system at a unified price for iron ore will be primary targets for CISA this year. He said that China must strive for a unified price for iron ore imports to regulate the market and erase the difference between contract and spot prices.

Agents can levy a commission of 3 to 5 percent on the total iron ore import charges collected.

Analysts have suggested that with Chinese steel production set to top 620 million tonnes this year, the benchmark price for iron ore imports would rise by anything from 30 per cent upwards. Investec Securities Plc raised its forecast for 2010 iron ore prices to an increase of over 55 percent. It had previously suggested a 20 percent hike.

Prices of the 63.5 percent iron-content ore rose to $142 per ton including freight on Monday, according to Mysteel Index, more than double the $60 a ton benchmark price level reached in 2009.

"The Hebei proposal aims to enhance import concentration to gain more bargaining power at the ore talks. However, the same can be achieved by consolidating steel mills, and I think that would be an easier step," said Hu Kai, a senior analyst at consulting firm Umetals.

Shandong Steel Takes 19.9 Per Cent Stake In Athena

Athena Resources has secured $2.2 million of funding for its Byro project, east of the West Australian port of Geraldton. Shandong Steel listed subsidiary, Ishine International Resources, will take 19.9 per cent stake in the Australian company.
Ishine will make a first payment of $1,037,500 followed by a second of $1,216,844 for a stake in the resource company. Ishine managing director, Dr Caigen Wang, will join the Athena board as a director of the company on completion of the first payment.

Athena now intends to seek shareholder approval to the issue of the shares and options for the Ishine deal in or about April 2010.

Byro was only discovered on December 10 last year. It comprises 26 areas of potential outcropping and buried iron ore targets with a combined strike length of 35km and is strategically located between the Jack Hills and Tallering Peak iron ore projects,only 60km from the planned Mid West iron ore railway. Athena has reported that iron assays in 45 rock chip samples over three magnetic target areas at Byro all exceeded 30 per cent iron, ranging from a low of 31 per cent to a high of 58 per cent Fe.

Jack Hills total iron mineral resource is estimated at about 96 million tonnes comprising of Direct Shipping Ore grading 58.7 per cent Fe and 991 million tonnes of magnetite Beneficiation Feed Ore grading 34.1 per cent Fe.

Tallering Peak, located 150km south of the Byro project has a mineral resource of 14.9 million tonnes at 61.8 per cent Fe.

Athena has significant base and precious metals targets in the Mid-West and in the Ashburton Mineral Field.

Indian Iron Ore Prices Head For $140 a Tonne

Reuters reports that iron ore prices from India are set to hit levels last seen during 2008. Deals done on Thursday were at $137-$138 a tonne C&F, up from $129 a tonne last week. Meanwhile there were rumours amongst traders of deals being done at $140-143 a tonne.

According to Beijing-based trade information company Umetal, steel mills did not increase inventories before the recent Lunar festival, leading to shortages when factories returned to work this week.

The price of iron ore last hit the $140 a tonne level back in 2008 when purchases for it post-Olympic infrastructure pushed up prices.

WISCO Receives Approval For Purchase Of MMX Stake

Wuhan Iron and Steel Company (WISCO), China's third biggest steel maker, will complete its acquisition of a stake in Brazilian iron ore miner MMX on 26 February. The company will then commence the construction of a steel mill in Brazil, the first overseas project for a Chinese steel company.

WISCO is paying US$400 million for a 21% stake in the enlarged share capital of MMX. The funds will be used to construct the mill, which will have a capacity of 5 million tons per annum and will be located in the new port of Acu, north of Rio de Janeiro. The purchase of the MMX stake will enable WISCO to succeed in its primary aim of securing iron ore resources.

The deal follows a memorandum of understanding WISCO and MMX signed in May 2009, which includes a 20-year contract for the sale and purchase of iron ore.

BHP Forecasts Doubling In Chinese Steel Output In 20 Years

The managing director of BHP says that he expects steel production in China to double by 2025.

Speaking to the Australian TV network, ABC, Marius Kloppers, said that he's optimistic about prices for iron ore and coking coal and is particularly positive about the outlook for Australian exports of those products following an analysis done by his company over the past year-and-a-half.

"We did a bottom-up analysis. How many buildings, what is the steel intensity and so on [and] we think that this trend is going to go on for the 20 years that we've forecast."

Miners, Steel Mills Edging Towards 40 Per Cent Iron Ore Price Hike

Platt’s are quoting media reports that the big three iron ore miners have asked China’s five largest steel mills for a provisional 40% rise in iron ore prices and at least one has indicated a willingness to agree to the increase.

The increase has been discussed with each of the five separately and a source close to the negotiations claims that the miners are optimistic that the steel producers will agree a price in the next few weeks.

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China Gets Ready To Take On Iron Ore Giants

China’s iron and steel industry looks set for mergers and integrations next year, as the sector gets ready to build its bargaining power to take on BHP Billiton and Rio Tinto.

A planned $US116 billion ($128.3 billion) joint venture of the Pilbara iron ore assets owned by BHP Billiton and Rio Tinto has upset many customers, including those in China.

The mining giants signed a binding contract for the merger of their iron ore operations on Saturday, expected to create $US10 billion in synergies for the companies.

But China’s official China Daily News said today that the move was conveying ‘‘severe price pressure to domestic iron and steel companies’’ and plans were made to respond.

‘‘Chinese companies have to concentrate and strengthen the bargaining power in price negotiations by integrating numerous smaller companies into several big strong players,’’ the news organisation said on its website.

‘‘Chinese industry has been considering the integrations, but must speed up.

‘‘The two giant iron ore suppliers have an over 30 per cent market share in total on the global iron ore market, and the merger makes a stronger monopoly,’’ it said.

In benchmark price negotiations for iron ore this year, Chinese steel companies were represented largely by the China Iron and Steel Industry (CISA), which demanded a better deal than competitors elsewhere.

But CISA came under criticism after its demands were rebuffed by iron ore sellers, and many Chinese companies were left paying spot prices, which were higher than benchmark prices.

The joint venture between BHP Billiton and Rio Tinto still must clear regulatory hurdles, including from European and Chinese regulators.

Source: Sydney Morning Herald

Nine Chinese Steel Mills Raise Prices On Market Kick-Up

Beijing News has quoted traders saying that nine steel mills scaled up steel prices together on October 21st without the involvement of those leading companies such as Baosteel, WISCO and Anshan Steel. It is not a turning point for the steel market but the situation in demand and supply is still serious.

China biggest private steel mill Shagang Group issued on October 21st the price policy for the last ten days of October pushing up prices of wire rod by CNY 80 per tonne and of rebar by CNY 60 per tonne which is the first price lift following continuous falling since mid August.

Following hot in the heels are other eight steel mills including Jincheng Fusheng Steel Ltd and Shuicheng Iron & Steel Group which also have raised prices of around CNY 10 per tonne by and large for wire rod. Rizhao Steel in addition has lifted HR prices mildly.

These middle and small steel mills' moves are triggered by the spot and future markets rally which are directly affected by the world demands picking up. This round of price lifting moves lacks the presence of Baosteel, WISCO and other large mills. Just on the same day, Shougang and Benxi Steel launched its steel products ex-works prices for November delivery of which there are still some are scaled down including HR and galvanized steel with cut of CNY 300 per tonne to CNY 350 per tonne.

There is not sufficient drive for the market to go up now. Recently domestic steel market didn't see continued rally but fluctuation. Construction steel eyed a mild drop and rebar lost CNY 8 per tonne on average in major cities with Beijing observed the deepest of CNY 80 per tonne.

Source: Steel Guru

Chinese Crude Steel "Half The World's Total"

According to Mr Chenbin, chief of the Coordination Departmen at China's National Development and Reform Commission, it is an irrefutable fact that China crude steel capacity has approached half the world's total amount.

Mr Chen, when interpreting the recently issued Advices about containing overcapacity and redundant building of some industries and guiding them into the healthy road for development, said that “Last year, Chinese steel capacity was 660 million tonnes, with equipment operating rate of around 76%, apparent consumption of around 453 million tonnes and crude steel production of 500 million tonnes, one fourth of which was for overseas market.”

He added that now China crude steel capacity has reached as close as half the world's total and it is hard to digest all the excessive capacity through exporting it to overseas.

He said that meeting domestic demand should be put to the crucial place in the development of the country's steel industry and then proper participation in international competition. China is naturally not equipped to become the world's steel products supply base due to its lack of iron ore and consideration the environment protection.

Source: Steel Guru

Chinese Steel Exports Hit By Cheaper Competition

Chinese steel products are losing their competitive edge compared with products from Russia or South Korea.

China's steel export was impacted by the policies from US and EU and at the same time, low-priced steel products from Ukraine, Russia and South Korea weighed heavily on China.

About 0.3 million tonnes low priced HRC from Ukraine was imported into China in February.

According to industry experts the import quotation of HRC from Russia and Ukraine in March surged to USD 320 per tonne while the price in China's domestic market stood as high as CNY 3150 per tonne which means the price difference has widened above CNY 1000 per tonne.

One industry added "However, Chinese steel industry was only impacted a little by such low priced imported cargos owing to the small amount of volume. The volume took up 5% of China's monthly HRC production of 6.0117 million tonnes in November 2008. But some relative experts consider those imported resources is becoming the main driver behind Chinese export drop. At present, Turkish HRC quotation is lower than a Chinese one to Middle East.”

One expert said that in order to cut inventory, global steelmakers have started to slash their export prices though currency depreciation is also a factor. So far, all Chinese steel products have lost their price competitiveness except steel tubes. Some prices abroad are still lower than Chinese prices even after the export rebate increase from April 1st.

Mr Liu Yuan said the root of the price fluctuation dates back to soft demand. Currently the larger steel consumption industries such as real estate, auto and ship building industries, remain gloomy. Takeing South Korea as a benchmark its top three shipbuilding enterprises have received no orders since February. The same applies to China although it adjusted its export rebate for 23 steel precuts on April 1st. However, the effect has been quite limited amid a sluggish market.

Source: China Metallurgical News via Steel Guru

China To Raise Steel Export Rebates

China will raise export rebates for textiles, steel, petrochemical and electronics starting on April 1st.

According to a report in the Xinhua newspaper, which didn’t provide further details, rebates will also be increased to help exporters of non-ferrous metals, and information-technology products.

The China Iron & Stel Associayion suggested in a report to the relevant govenrment departments that all steel exports should enjoy an export rebate. The export rebate rate for such high value added products as cold rolled coil, galvanized coil, alloyed steel should be raised to 13% from 5%. CISA disclosed that the real rebate rate change may be a little different with those suggested though they have been trying to get more increase. Further, hot rolled steel coil would not enjoy export rebate. The final result will be announced soon by Ministry of Finance of China.

Customs statistics show that steel export tonnage for February was 1.56 million tonne down by 49.8%YoY and 18.3%MoM. The total export volume for January and February is 3.47 million tonnes, a drop 52.1% YoY from the period of last year. There are few new contracts in 2009 since 60% of them were signed in late 2008. Export tonnage is likely to see an 80% slump in 2009.

Market analysts believe that the rebate rate increase may help, but what really accounts for the fall is poor overseas demand. Export prices for Chinese steel products are not as competitive in the world market as those by South Korea, Turkey, South East Asia and CIS countries which are much lower. It is regarded as an effort by Beijing to support the Chinese steel industry in the current world recession. China has also lowered export the rebate rate or levied an export tax to cool exports in the past few years.

Source: Steel Guru

Angang Steel Forecasts 55 Percent Profit Fall

China's Angang Steel Co Ltd said today (Tue) that it expects its 2008 net profit to fall 55 percent to about 3.42 billion yuan ($500 million) due to high raw material costs and slumping steel prices. Analysts said the forecast was within expectations.

The sharply lower profit was due to price rises in raw materials and fuel, high fixed input but low output in its newly-built production zone and a provision of 1.8 billion yuan for steel product stockpiles devaluing, Angang said.

Chinese steel makers are grappling with a sharp decline in earnings as steel demand weakens in the world's top metal consuming country as a result of fallout from the global financial crisis affecting the real economy.

Source: Reuters