Driven by surging freight costs, imported iron ore prices may rise, China's industry representative hinted ahead of annual price negotiations scheduled to take place next month.

 

Xu Lejiang, chairman of Baoshan Iron & Steel Corp (Baosteel Group), said on Friday that iron ore prices should remain stable, but added that recent rises in freight costs had sparked concerns that import prices may be affected.

 

"The freight cost hikes have made iron ore exporters complain a lot and we have already been aware of that," said Xu, a delegate to the ongoing 17th National Congress of the Communist Party of China.

 

Xu, whose company is China's biggest steel producer, said this new factor should be taken into account when Baosteel Group, representing China's 16 major steel giants, goes into talks on iron ore prices for 2008 next month with the world's top three suppliers - CVRD, BHP Billiton and Rio Tinto.

 

Following a 19 percent increase last year and a 71.5 percent surge in 2005, the top three suppliers, who control three-quarters of the global iron ore trade, upped prices by 9.5 percent last year.

 

China's iron ore imports grew 19 percent year-on-year to 222 million tons in the first seven months of this year, according to official statistics.

 

Xu said China, the world's biggest steel producer, will be importing more iron ore from other countries while it continues to expand its mining activities in China.

 

"Instead of only benefiting China, our imports can generate revenues for the exporting countries," said Xu.

 

He said that Australia, Brazil and some Asian countries should become China's major iron ore suppliers.

 

Xu said Baosteel Group has already exceeded last year's full-year profit in the first nine months of this year, driven by demand from automakers, shipbuilders and construction companies.

 

The Shanghai-based company had a profit of 29 billion yuan in the nine months ending on September 30, compared with earnings of 22.3 billion yuan in 2006.

 

"All the latest progress has laid solid foundations for further mergers and acquisitions both at home and abroad," said Xu.

 

Standard & Poor's gave the company one of the best credit ratings in the world this month, awarding Baosteel an A-, up from a BBB+, one of only two global steel companies - South Korea's steel giant POSCO is the other - with that rating.

 

Baosteel took over Xinjiang Bayi Iron & Steel Group this year, its first acquisition of a mill since it was formed in 1998.

 

With first-phase investment of US$3 billion, Baosteel has launched its first overseas project in Brazil.

 

"We plan to invest or launch more projects in other resource-rich countries," said Xu.

 

Xu also said his group has long thought of listed on overseas stock markets. "That should be part of our strategy to build up international competitiveness."

 

(China Daily October 20, 2007)