Shougang partners with CVRD of Brazil
By Gong Zhengzheng (China Daily)Updated: 2007-01-04 10:06
Iron ore prices have been climbing rapidly in recent years mainly boosted by
strong demand from China, the world's biggest iron ore consumer and
importer.
Baosteel, China's top steel group, on behalf of more than 100
major steel firms in the country, last month agreed on a 9.5 percent increase in
iron ore prices for 2007 with the world's three largest suppliers CVRD and
Australia's BHP Billiton and Rio Tinto.
The increase came after a 19
percent rise in 2006 and a massive 71.5 percent hike in 2005.
The China
Iron & Steel Association last month estimated the nation's 2006 iron ore
imports would reach 325 million tons, up 18.2 percent from the previous year. It
predicted imports this year would rise by 30 million tons, or 9.2
percent.
Tian Shuhua, a steel industry analyst from China Galaxy
Securities Co Ltd, said: "Freight accounts for the bulk of iron ore's CIF (cost,
insurance and freight) prices for Chinese steel mills, which have been violently
fluctuating in recent years."
"Shougang's partnership with CVRD will
enable it to control price risks and obtain a reliable iron ore supply," Tian
said.
Freight now represents more than one-third of average CIF prices of
iron ore for Chinese steel mills which now stay at about $64 per
ton.
Shougang's Liu said last month the company plans to double steel
production from the level of 2005 to 20 million tons a year by 2010.
The
company currently has a combined production capacity of 13 million tons in
Beijing and Hebei.
It is moving most of its facilities from Beijing to
Hebei as part of the government's efforts to alleviate pollution in the city,
which will host the 2008 Olympics.
CVRD, which controls one-third of
global iron ore seaborne trade, is beefing up efforts to explore the market in
China.
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