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.

Iron Ore Talks Beset By Differences

Miners Cutting Supplies

Iron ore price talks are “beset by differences” according to the chairman of one of China’s largest steel manufacturer, Angang Steel Co.

Speaking to reporters in Hong Kong on Wednesday, Zhang Xiaogang said that the big three global miners actually cut exports to China during the talks. “That was a step they took as part of the negotiations,” he said.

The big three global miners – BHP Billiton, Rio Tinto and Vale - are trying to get Chinese miners to go from annual to quarterly contracts. Steelmakers in other parts of Asia, such as Korea and Japan, agreed quarterly prices from 1 April, however their Chinese counterparts – with the support of their government – are holding out for an annual benchmark deal.

Angang plans to increase capital spending by 19 percent to $1.4 billion this year, company secretary Fu Jihui said in Hong Kong. The company has enough capital to cover operations, and doesn’t plan to sell any more equity, Fu said.
Orders and export demand for steel are improving this year, Vice Chairman Chen Ming said.

Gindalbie Signs Karara Loan Deal With Chinese Banks

China To Provide $1.2 Billion Loan

China Development Bank Corp. and Bank of China Ltd., have agreed to provide most of a $1.2 billion loan to Gindalbie Metals Ltd. to develop its Karara iron ore mine in Western Australia.

Gindalbie, which is developing the mine in a joint-venture with China’s Anshan Iron and Steel Group (Ansteel), said on Friday that it has signed a mandate letter with the banks for a 12-year loan facility. Conditions will be finalised by 30 June. The project loan facility will be secured against the Karara project and the shareholders’ shares in the joint venture project vehicle, Karara Mining Limited.

Last month Gindalbie and Anshan signed an agreement estimated to be worth $65 billion for the Chinese steelmaker to buy the whole of Karara’s output over the life of the mine. The mine is expected to begin production next year with output estimated at 30 million tonnes a year.

Gindalbie Managing Director Garret Dixon said in a statement that the loan is based on the US six-month London Inter-Bank Offer Rate (LIBOR) without giving details of the margin.

Ansteel Expects Iron Ore Price By April

The president of one of China’s largest steelmakers said on Wednesday that a deal on benchmark iron ore prices is expected to be reached by April.

"I am not taking part in the negotiations but a result should come out by April 1 -- it is almost mid-year and if a price hasn't come out by then, it isn't normal," Zhang Xiaogang said.

Speaking on the sidelines of China’s latest parliamentary session, Mr Zhang said that while he did not know how much more steel mills would be paying for their iron ore, it was likely to be higher than the 20 per cent expected at the end of last year.

"What a normal price should be is hard to say, but you shouldn't have one side making losses and the other making excess profits," Mr Zhang said, "All steel firms feel the same way -- whether it is Nippon Steel, JFE, Posco, Thyssen Krupp, Mittal, US Steel or us -- we all feel deeply dissatisfied, but we have no option (but to accept the price rises)." He added that whether or not the benchmark system would survive would depend on the outcome of this year’s talks.

Listed Chinese Steel Mills Post Losses Of Over CNY 1bn

Securities Times reports that 15 Chinese listed steel mills have issued H1 reports with total losses of CNY 1.13 billion between them in Q2. However, the loss has decreased 51.3% from Q1.

Statistics from Wind Information show that the total loss of the 15 mills in H1 posted at CNY 3.45 billion contrasting sharply with CNY 14.81 billion earned in the same period of last year. Operating revenue also shrank. Total revenue in H1 was CNY 167.13 billion declining 32% from a year ago.

Angang Steel Co Ltd suffered losses of CNY 1.563 billion in H1, Ma'anshan Iron & Steel Co Ltd posted losses of CNY 795 million and Jinan Iron & Steel Co and Laiwu Iron & Steel Co registered losses of CNY 875 million and CNY 598 million respectively. However, Xinxing Ductile Iron Pile Co Ltd earned a profit of CNY 472 million in the period and Tangshan Iron & Steel Co and Handan Iron & Steel Co both recorded profits though they are in the process of regrouping at present.

Preparation for stock devaluation also increased and amounted to CNY 1.272 billion in H1 for the 15 mills, versus CNY 374 million from a year ago. Preparation posted at CNY 773 million at Chongqing Steel, CNY 180 million at Angang and CNY 49.53 million at Ma'anshan Steel.

Nanjing Iron & Steel predicts more than a half net decline in the first three quarters, since its H1 profit stood at CNY 55.56 million versus CNY 646 million gained in the first three quarters of last year. Analysts speculate that the company would make a profit of above CNY 200 million in Q3.

Lingyuan Iron & Steel also expects to reverse the loss-making condition in the third quarter.

Source: Steel Guru

Oakajee, Angang In Supply Talks Over Rail Project

Oakajee Port & Rail Pty, planning a A$4 billion ($3.2 billion) iron ore port and rail project in Western Australia, is in talks to buy building materials and get funding from Angang Steel Co. and other Chinese companies.

Oakajee Port, a venture between Mitsubishi Corp. and Murchison Metals Ltd., has also held talks with Japanese mills and South Korea’s Posco, Chief Executive Christopher Eves told reporters today.

Iron ore producers in Australia have sold shares and brought in Chinese investors as they sought funding amid the global credit crunch. Steelmakers could help Oakajee Port with export-related financing in return for building materials purchases, Eves said today.

“I need to buy rail and the iron ore goes to Angang, for example, which makes rail,” Eves said at a media briefing in Geraldton, Western Australia, today. “Export-related finance provision to OPR we see is certainly one avenue” to help fund the project, he said.

Eves will travel with Western Australian Premier Colin Barnett to China at the end of July to talk to suppliers of material and equipment, he said.

Oakajee may make its first shipments from 2013 with construction scheduled to start from 2010, according to Barnett. Perth-based Murchison and Japan’s Mitsubishi will need to raise about A$3 billion in the next 12 months to fund construction, Eves said in March.

BHP Billiton Ltd., the world’s biggest mining company, said this month it will pay Rio Tinto Group $5.8 billion to create a venture covering the companies’ Western Australian iron ore assets. The tie-up will benefit Oakajee Port & Rail, Eves said.

“If you’re a steel mill in China and you had Rio Tinto competing against BHP and now they’re in a joint venture together, the next logical place to look” is Oakajee, Eves said.

Oakajee Port & Rail expects to make announcements by July 1 on hirings and the appointment of a project managing contractor, Eves said.

Source: Bloomberg

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