Steelmakers in China, the world's largest consumer of iron ore, need more ``guidance'' on overseas acquisitions of iron ore assets, the country's top policy planner and 13 steel mills said.
Baosteel Group Corp. and other mills should study and offer suggestions to the government on how to secure iron ore supplies for the country's needs, the National Development and Reform Commission said in an April 14 statement on its Web site.
China is buying assets across the globe to secure supplies to fuel surging economic growth as commodity prices rise to records. China has bought a stake in BP Plc, Europe's second-biggest oil company, adding to Chinese investments in France's Total SA and Rio Tinto Group, the world's second-biggest iron-ore exporter.
``China has realized that to sustain the economic development, it must control the resources,'' Julian Zhu, a Hong Kong-based analyst with Deutsche Securities Asian Ltd. ``It is very clear that the government will support its state-owned companies going abroad.''
Iron ore prices jumped as much as 71% this year, the sixth year of gains, because of surging demand from steel mills in the Asian nation. China is in the ``early stages'' of buying a stake in BHP Billiton Ltd., the world's third-largest exporter of the ore, the Australian newspaper reported last week, citing unidentified people.
Chinese companies have invested into Western Australia's iron ore sector to secure supplies. Anshan Iron & Steel Group has a 50% stake in Gindalbie Metals Ltd.'s proposed $1.6 billion Karara mine and China Metallurgical Group Corp. bought Cape Lambert Iron Ore Ltd.'s iron ore project for $400 million in February.
Buying Ore
China may increase imports of iron ore by 14% this year to 435 million metric tons, following a 17% gain in 2007, according to the China Metallurgical Mining Enterprise Association on April 2. The country's mills buy iron ore from Brazil's Cia. Vale do Rio Doce, Australia's BHP Billiton and London-based Rio Tinto Group.
``Following the surge in iron ore prices, many domestic companies have very high interests in investing in iron ore assets overseas,''the commission said. This needs more ``guidance from the government,'' it said.
This conclusion was reached in an April 10 conference organized by the NDRC to consider how to ensure the security of China's iron ore supplies. Representatives from 13 mills, including Baosteel and Wuhan Iron & Steel Group Corp., attended the conference in Beijing.
``Rather than have a whole heap of companies out there willy nilly, it makes sense to have some sort of coordinated attack,'' Gavin Wendt, senior resources analyst at Fat Prophets Funds Management in Sydney, said by phone. ``They want to get their foot on resources and secure the product longer term.''
BHP Billiton has made a hostile $US166 billion ($1.77 billion) takeover proposal for Rio, which would create a company supplying half of Asia's iron ore needs.
Bloomberg