China’s Baosteel explores iron ore investment in India

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Guangzhou, China, March 10: Baosteel Group, China’s largest steel maker, said on Thursday it was considering an investment aimed at securing supplies of iron ore in India, the second-largest supplier of the raw material for the country.

Baosteel, which controls listed Baoshan Iron and Steel Co Ltd, plans to open an office in New Delhi this month to conduct a feasibility study for an investment in a venture with an Indian partner, a Baosteel executive told Reuters.

Securing iron ore has become a priority for many Chinese steel mills, which would have to contend from April with a spectacular 71.5% increase in iron ore prices from miners such as Companhia Vale do Rio Doce (CVRD), Rio Tinto Ltd/Plc and BHP Billiton Ltd/Plc.

“We are considering if we can make an investment in India to get iron ore,” said Yu Zhonghai, director of the International Business Development Department. “We want to control more iron ore in the international market.” “We don’t know whether we have a chance to invest or not. But we want to look into the possibility,” he said on the sidelines of a conference organised by the China Iron and Steel Association. “Baosteel is already buying iron ore from India.”

“If we decide to make the investment, we will definitely have a partner there,” the executive added.

The executive did not name a prospective partner, but India, the world’s third-largest iron ore producer, is home to such suppliers such as state-run National Mineral Development Corp, Kudremukh Iron Ore Co Ltd, and Sesa Goa Ltd.

China now has the world’s biggest crude steel production capacity, about 300 million tonne annually. Baosteel, which has annual capacity of 20 million tonne, has already signed onto iron ore mining projects with CVRD in Brazil.

In 2004 China imported 208 million tonne of iron ore, with 50.14 million tonne coming from India, customs figures show.

That made the Asian country China’s number-two supplier, after Australia, which shipped 78.16 million tonne.

The third was Brazil, with 46.03 million tonne. Mr Yu said Baosteel was now buying Indian iron ore in the spot market, instead of signing long-term contracts. It got a few hundred thousand tonne from India last year, he said, without elaborating. Asked about the 71.5% iron ore price increase, he said: “We were forced to accept it.”

Despite being now the world’s top importer of iron ore, steel mills in China have failed to develop strong bargaining power.