In the face of spiraling global coal and iron prices, Taiwan’s China Steel Corp. is actively seeking partnerships with mainland Chinese and Japanese steel firms to develop raw materials sources.
According to company officials, CSC has approached the mainland’s Baosteel Group Corp., Shoudu Iron and Steel Group, Angang Steel Co. Ltd. and Sinosteel Corp., as well as Japan’s Sumikin Bussan Corp. “There is no upper limit to investing in mines,” said CSC Chairman and CEO Chang Chia-juch.
For the last several decades, contracts with mines have been on a yearly basis to better control blast furnace costs, but this year mine owners have forced a change to seasonal contracts. Coal and iron prices fluctuate seasonally, making cost control difficult and increasing risks for large steel mills.
According to a steel industry analyst, globally speaking iron mines are overly centralized, and in recent years there has been a bull market for steel, making mine owners even more demanding, to the disadvantage of large steel producers.
To combat this trend, steel works around the world have begun to form partnerships for upstream mine investments. Such deals have been struck among mainland Chinese, Indian, Japanese and South Korean firms, and CSC is no exception, the analyst added.
Chang said obtaining mineral resources is an arduous task, requiring large amounts of capital for the huge scale of coal and iron mines. “The point to investing in mines is not the amount of capital, but to stabilize raw materials sources,” he noted.
In the international steel arena CSC is a medium-sized steel mill, so it hopes to join hands with other steel companies in Asia to pool resources for investment in raw materials.
Chang pointed out that large steel firms have now entered a period of combined competition and cooperation. In selling steel they compete for business opportunities, but they work together in mine investments. They are prepared to make unlimited investments in upstream mines if conditions are right.
L.M. Chung, CSC executive vice president, said the company has already made investments in two mines, putting NT$400 million (US$12,640,227) into a 5-percent share in Australia’s QCoal Sonoma Pty. Ltd. mine, which is expected to provide 47 million metric tons of coking and thermal coal.
CSC has also invested NT$3 billion for a 1-percent share in Brazil’s Namisa iron mine, which potentially could produce more than 1 billion metric tons of iron ore. (THN)