In any case, a reminder...HEADLINE: Chinese move to lock up...

In any case, a reminder...

HEADLINE: Chinese move to lock up steel s chain
AUTHOR: Michael Vaughan

Mining industry insiders are speaking of the 'China window' - an unprecedented opportunity to take
advantage of the strong demand from China, to start up projects that would normally never get off the
ground.

The last two weeks have seen two deals struck before the completion of studies into their worth that could see Chinese steelmakers spending billions of dollars on Australian iron ore developments. The Chinese steel industry is currently in a consolidation phase, with mills competing for long-term iron ore supplies, while simultaneously battling to break the stranglehold on iron ore prices held by giants BHP Billiton, Rio Tinto and CVRD.

In order to do this, Chinese companies are funding project developments in order to increase supply but secure output for themselves. Two weeks ago one of China's biggest steelmakers, Shougang, signed a deal with Australasian Resources to help fund Australasian's $2.1 billion Balmoral South development. Days later, Cape Lambert Iron Ore agreed to sell 70 per cent of its project in the Pilbara to Liguo Ding, the head of Chinese steel mill operator Delong Holdings.

Both these projects contain magnetite, a lower-grade ore that when processed allows steelmakers to increase
efficiency and decrease environmental impact, but which needs more upfront capital to develop. Hitherto,
Australia has almost exclusively produced higher-grade ore hematite.

Chinese demand means Australian magnetite producers are now getting the backing that local institutions would not provide, as seen in Fortescue Metals Group's deal with Baosteel, China's biggest steel producer.
© Media Monitors Pty Ltd 2007

http://www.traffordresources.com/images/stories/newspaper/05042007%20-%20AusFinReview.pdf