Wuhan SteelWuhan Steel eyes overseas plant, coal resources
Mon Mar 7, 2011 12:19pm GMT
* Wuhan Steel eyes Canada coking coal resources
* No plan to withdraw from Riversdale coal project
* Target to secure over 1 bln T of coking coal resources
By Ruby Lian and Tom Miles
BEIJING, March 7 (Reuters) - China's third-largest steelmaker, Wuhan Iron and Steel, is working on plans to build a steel plant overseas, its president said on Monday.
"We are in talks with a company on plans of setting up a steel plant overseas but can't disclose the company's name," Deng Qilin told reporters on the sidelines of China's annual parliament session.
He said the company had not yet signed an agreement yet, but was working on the cooperation plan.
Deng said on Saturday that China, as the world's top iron ore buyer, continues to have no say in setting global prices of the key steelmaking raw material.
China, producing almost half of the world's steel output, will suffer a shortage of iron ore supply over the next 10 years as the country is still expanding its steel capacity, he said.
"China is expected to produce more crude steel this year, and a surplus in iron ore supply is unlikely to be seen over the next 10 years, let alone two or three years," Deng said.
Wuhan gets 80 percent of its iron ore from abroad. Facing rising raw materials costs and a profit squeeze because of surplus steel capacity within China over the last two years, it has been eager to invest in mining foreign resources to lessen its reliance on the big global suppliers.
China's government is encouraging big steelmakers to gain more control over foreign iron ore and wants half of the foreign supplies to come from Chinese-invested mines by 2015.
Wuhan, China's No.3 after Hebei Iron and Steel and Shanghai's Baoshan Iron and Steel (600019.SS:Quote), aims to achieve an annual steel capacity of 60 million tonnes by 2015, from 40 million tonnes currently.
EYES COKING COAL
Wuhan Steel is also eyeing investment in coking coal, another key steelmaking ingredient, in other countries to help minimise production cost, after the company's profitability ratio fell as low as 2.97 percent in 2010, half the Chinese industry average.
"We are also interested in investing in coking coal resources, not only in iron ore," Deng said.
Wuhan Steel last year negotiated an $800 million agreement with Riversdale Mining (RIV.AX:
Quote) to get a 40 percent stake in its Zambeze coal project in Mozambique. But the deal was suspended in January after Rio Tinto (RIO.AX:
Quote)(RIO.L:
Quote) made a $3.9 billion bid for Riversdale.
Deng said Wuhan still wanted the deal to go ahead, whoever ended up owning the African asset.
"We are still keeping a close eye on the project. We are not intending to withdraw from the deal as both Riversdale or Rio Tinto would be happy to see us involved as a consumer of coking coal," Deng said.
Wuhan Steel is also planning to expand investment in coking coal in other countries including Canada, but warned that investment in Australia, which is rich in coal resources, would be hard.
Under its plan for the next five years, Wuhan Steel aims to acheive self-sufficiency in iron ore and have more than 1 billion tonnes of coking coal resources overseas under its control, with an annual supply capacity of 30 million tonnes by 2015. (Editing by Jason Neely)