Chinese iron ore market 'recovering'
John Garnaut, Beijing
December 17, 2008
SINOSTEEL, China's biggest iron ore importer and trader, says the Chinese ore market is recovering and it wants to "accelerate" shipments from Australia.
The comments come as Rio Tinto and BHP Billiton prepare to start a new round of annual contract price negotiations with Baosteel.
"Obviously a lot of (iron ore) trading companies have suffered a lot in the past two months and many trading companies have already disappeared," said Sinosteel's Frank Feng, deputy general manager of iron ore imports and domestic sales.
"I think the market has now stabilised and will gradually become warmer. We have already returned to profitability."
Sinosteel's confidence suggests that cuts to next year's contract prices and import volumes will not be as severe as some analysts expect.
A stabilising market may save dozens of small Australian mining hopefuls that faced oblivion as China's monthly steel production plummeted 25 per cent between June and October, before picking up in recent weeks.
Yao Guoying, at Steel Bus industry news service in Tangshan, the heart of China's steel industry, said most local steel mills had returned to running at close to capacity.
The spot market price of imported iron ore has edged higher from $US59 to $US63 a tonne since the start of this month and daily bulk shipping rates have risen from $US2400 a tonne to $US12,200.
Sinosteel's Mr Feng confirmed a report in Friday's Age that Sinosteel had been posting iron ore trading losses and had delayed shipments from its Channar joint-venture mine in the Pilbara, which it shares with Rio Tinto.
But he said the company would accelerate shipments between now and December 30 to honour its purchasing obligations.
He said the Channar contract required Sinosteel to buy 11 million tonnes of ore each calendar year, plus or minus 10 per cent.
"Already our Channar imports are more than 9 million tonnes and we have to import another 600,000 tonnes to fulfil our contractual obligations," Mr Feng said.
"Both parties are discussing how we will accelerate cargo shipments."
Sinosteel executives also pledged to press ahead with their original mine development plans at Midwest Corporation, which it acquired in China's first hostile takeover earlier this year.
Michael Wu, who led the $1.3 billion acquisition, said the company planned to start large-scale production as soon as the rail and port facilities were ready in 2011 or 2012.
"Sinosteel is working to play the role of long-term strategic investor, not opportunist, in the region," Mr Wu said.
He said a feasibility study for an initial 15-million-tonne development would be completed in the first half of next year.
"So the overall production of Midwest will be more than 15 million tonnes, as we might have three, four or more parts."
Mr Wu said Australia's Foreign Investment Review Board had not stymied Sinosteel's Midwest development plans by preventing it from acquiring a majority stake in neighbouring Murchison Metals.
He said gaining control of neighbouring Murchison Metals was "not a precondition" for developing Midwest.
Sinosteel also confirmed a Friday Age report that it would soon undergo a management reshuffle at the suggestion of its ultimate owner, the state-owned Assets Supervision and Administration Commission, despite issuing a denial on the company's website on Friday afternoon.
"SASAC nominated Fu Yueyan, he has been appointed as the new general manager of Sinosteel Holding Company," said Li Kejie, general manager of the president's office at Sinosteel.
Mr Li said the company had planned to inform the public after the Sinosteel board had ratified the nomination and Mr Fu's personal circumstances allowed him to start work.
The company is seeking regulatory approval for a stock exchange listing next year.
dont be surprised to see rockcheck or hebei/chendge sniffing around, see the comments about Sino looking or opportunities. The analysts forecasts of a 50% drop look pretty stupid now.
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