China’s largest steel company, Baowu Steel Group Corp Ltd announced plans to expand its overseas footprint to boost its share of global iron ore mining operations. Baowu Steel Group Chairman Chen Derong revealed that they had selected an overseas target and added that the company would team up with other steel producers and jointly establish a fund to develop the mine, which would supply iron ore with an estimated cost, insurance and freight (CIF) price of roughly $40 per ton which will be well below the average price of imported ore last year. He said the company would team up with other large producers to build a procurement platform to bring down costs.
He also said, “The sharp rise in iron ore prices over 2019 had been painful for the industry and that international iron ore producers made bumper profits while the average price of imported iron ore in China surged to $90 per ton.”
Although China has the world’s fourth-largest iron ore reserves but owing to the low-grade stock there is a requirement for costly processing to extract a useful amount of metallic iron. It is further hindered by a reliance on foreign mining equipment and a dearth of advanced techniques like remote and unmanned mining.
Overseas iron ore mining forays by Chinese companies often fail due to lack of experience and local knowledge, as well as a failure to conduct sound risk analysis and plan accordingly, analysts say. They also tend to focus on lower-quality mines because higher quality ones are controlled by global leaders.
In 2002, Baosteel Group formed a joint venture with Bao Ruiji Iron Mine and Australia’s Hamersley Iron Pty. Ltd. It has also established projects with Australian ore company Fortescue Metals Group Ltd.
