TPT 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

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September 2012