from the Weekend Australian
Fortescue Metals still in Sinosteel's sightsFont Size: Decrease Increase Print Page: Print Elizabeth Gosch | May 24, 2008
A SECOND executive from Sinosteel has refused to rule out the Chinese steel giant taking a stake in Fortescue Metals Group, as resources experts advised Australia should be more open to investment from its booming Asian neighbour.
Sinosteel chairman Huang Tianwen earlier this week confirmed Sinosteel was still interested in FMG, which shipped its first load of iron ore from the West Australian Cloud Break project late last week. "We're not ruling out the possibility of buying shares in Fortescue Metals Group," he said.
At the Association of Mining and Exploration Companies' annual conference in Perth yesterday, the steelmaker's Australian representative, William Ren, said Sinosteel was considering investment in local iron ore projects.
"Basically, the reasons or the logic behind this is Chinese steel mills need more iron ore," Mr Ren said. "No matter if it's in the Mid-West area (of Western Australia) or in the traditional Pilbara area, wherever there is iron ore, we'd like to get involved or to secure more of these assets."
Following the comments, Fortescue shares reached a record of $9.98 before closing 14c lower at $9.56. Meanwhile, at the mining conference, executives warned Australia not to discourage Chinese investment in the sector.
Beijing Axis general manager Kobus van der Wath, a South-African businessman based in China, said foreign ownership of Australian resources projects should be welcomed but closely managed. "China's a phenomenon that's here to stay," Mr van der Wath said.
Financial commentator Michael Pascoe said Australia was succeeding because it was an open economy and should remain that way and not discourage offshore investment. "I just see it as part of the evolution of the industry and a good thing," he said. "If foreigners have the sense to invest in this fantastic opportunity, then I say let's take the money and make money with it."
Mr Ren, deputy general manager at Sinosteel Australia, also updated the conference on Chinese demand for iron ore, which he said was still strong, although slowing marginally. Steel production had dropped off slightly from the double-digit growth recently recorded but would still deliver "top single-digit" growth.
"Production of steel capacity is 550 million tonnes per year and in the past few years the growth year-on-year is way (into) double digits," he said. "At the moment, that's slowing down a little bit.
"With production capacity of 550 million tonnes a year and a 10 per cent annual increase, you realise how much iron ore is needed. 50 million tonnes of steel is about 85 million tonnes of iron ore." The conference also heard Australia's mining industry had advanced projects to the value of $70.5 billion.
"This is a record value and number of projects and will lead to continued expansion in the production and capacity of Australia's mining industry," Australian Bureau of Agricultural and Resource Economics executive director Phillip Glyde said.
The $70.5 billion recorded by Abare reflects 97 advanced projects under construction or committed to across the country.
While energy projects account for about 55 per cent, or $38.8 billion, of the total, iron ore was also a major inclusion, accounting for 23 per cent of the total.
FDL
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