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," he told the Herald. "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 fell 25 per cent between June and October, before picking up in recent weeks.
Yao Guoying of Steel Bus industry news service in Tangshan said most local steel mills had returned to close to full capacity.
The spot market price of imported iron ore has risen from $US59 a tonne to $US63 a tonne this month, and daily bulk shipping rates have risen from $US2400 a tonne to $US12,200.
Mr Feng confirmed a report in the Herald on Friday that Sinosteel had been posting iron ore trading losses and had delayed shipments from its joint venture Channar mine in the Pilbara, which it shares with Rio Tinto.
But he said the company would increase shipments in the next fortnight to honour its purchasing obligations. The Channar contract required Sinosteel to buy 11 million tonnes of ore each calendar year, plus or minus 10 per cent, he said.
"Already our Channar imports are more than 9 million tonnes, and we have to import another 600,000 tonnes to fulfil our contractual obligations."
Sinosteel executives also pledged to press ahead with mine development plans at Midwest Corporation, which it acquired in China's first hostile takeover 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."
A feasibility study for an initial 15 million tonnes development would be completed in the first half of next year, he said.
"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 gaining control of neighbouring Murchison Metals was not a precondition for developing Midwest, and the two could co-operate in management and marketing.
Sinosteel confirmed that it would soon undergo a management reshuffle at the suggestion of its ultimate owner, the state-owned Assets Supervision and Administration Commission.
Interesting to see that there are suggestions of recovering demand for ore.
MMX Price at posting:
58.0¢ Sentiment: Buy Disclosure: Not Held
