TPT September 2012

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104 September 2012
Global Marketplace
Steel
China’s Hebei Steel shores up
its access to iron ore supplies
by joining a project on Canada’s
Atlantic coast
The official Chinese news agency Xinhua on 9 July quoted
local authorities as saying that Hebei Iron & Steel Group,
China’s largest steel producer, had obtained the go-ahead
from Beijing to invest in Canadian iron ore developer Alderon
Iron Ore Corporation. In April, Hebei Steel said that it planned
an investment of about C$194mn (US$195mn) for a near-20
per cent stake in Alderon itself and a 25 per cent interest in
Alderon’s Kami project, located in the Labrador Trough on the
east coast of Canada.
Identified as a very promising region, the Labrador Trough in
the Canadian Maritimes would seem poised to become one
of the world’s major iron ore producing regions. Demand for
iron ore is surging worldwide. With active encouragement
from Ottawa, the Canadian iron ore sector attracted $15bn in
investment in 2011 alone.
The Kami project has proven reserves of about a billion
metric tons, with an expected annual output of 8 million mt
of iron ore after it goes into production in 2015, Xinhua said.
The deal would also give Hebei the right to buy 60 per cent of
Kami output every year.
As noted by Reuters (9 July), the Hebei-Alderon deal
announced in July may be seen as an effort by Chinese steel
producers to bolster their access to foreign iron ore supplies,
dominated by a handful of global miners. China’s steel mills
have been urged by the government to source at least half
of their iron ore imports from Chinese-owned or -invested
projects by 2015.
Of related interest . . .
› In Beijing on 4 July, a spokesman for Wuhan Iron & Steel
Group firmly denied a local business newspaper report that
China’s fourth-largest steel producer had shelved a project to
build a steel plant in Brazil on grounds that the projected costs
are too high. The $5bn plant is slated to produce 5 million
metric tons of steel a year at a site at the port of Acu, in Rio
de Janeiro state, but its launch date has not been confirmed.
However, Marketwatch.com reported that the Brazil-based
research unit of Barclays Capital considers the completion of
the Acu project improbable.
According to Barclays, the Wuhan venture to produce slabs
in partnership with Brazil’s EBX Group is still at the feasibility
study stage and runs “high risks” of not gaining the necessary
approvals, as it guarantees only a minimal rate of return on
investment.
Wuhan’s head of operations in Brazil was quoted by the
Estado newswire to have acknowledged difficulties related to