Posted on 30 May 2008
"Baosteel will seek a stake in Fortescue when both
sides reach an accord on a number of things, including common goals,
development strategy and market positioning," said Xu Lejiang, chairman of
Baosteel Group, yesterday at Baosteel's Majishan Port in Zhejiang province,
where he received its first shipment of 170,000 tons iron ore from Fortescue.
Baosteel signed a 10-year iron ore supply contract with
Fortescue in February last year under which it will get 20 million tons of ore
every year.
The third largest iron ore supplier in
"The Chinese industrial champion takes Fortescue very
seriously, and we will encourage its participation in the future of
Fortescue," Andrew Forrest, founder of Fortescue, was quoted by Reuters as
saying yesterday.
Fortescue has already signed contracts with 33 large and
medium-sized Chinese steel manufactures for at least 10 years.
As the ore price increased 65 percent and the coal price
tripled this year, Chinese steelmakers have begun buying overseas mining assets
to reduce costs.
"In addition to the cost-cutting benefits, such stakes
can also ensure a much stable long-term raw material supply, which is very
important for Baosteel given the current global market condition," said Du
Wei, an analyst at Umental.com, a metal information provider.
Liu Yanqi, an analyst at Haitong Securities, said: "The
possible alliance is expected to strengthen Baosteel's power in iron ore price
negotiations with Australian miners, such as Rio Tinto and BHP Billiton."
Baosteel has agreed to a 65 percent increase in iron ore
price with
With most of its iron ore to be sold in
Shares of Baoshan Iron & Steel Co, the publicly traded
unit of Baosteel Group, fell 3.72 percent to close at 12.16 yuan yesterday.
