Rio Tinto Signs Iron Deal With One Of China’s Top Steelmakers

Via AG Metal Miner

New developments continue to signal coming improvements in Chinese steel production. Among these is a forecast of prospects for the country’s vehicle sector and shipyards. This would ultimately thaw out the Sino-Australian relationship.

One of the world’s biggest steelmakers, China’s Baowu Steel Group Corp., is keen to seek closer ties with Aussie iron ore miner Rio Tinto. This comes as Chinese iron ore continues to rebound. In fact, a report from Bloomberg detailed Baowu Chairman Chen Derong’s recent meeting with Rio officials. During the meetup, Derong made it clear his company wants to benefit from efforts to repair trade relations between China and Australia.

After two years of diplomatic spats, Beijing resumed some shipments from Australia earlier this month.

Australia and China Looking to Improve Strained Relations

News hit that the Australian government had permitted a joint iron ore project between Rio Tinto and Baowu. According to the media outlet “The Australian,” the move represents the biggest Chinese investment in Australia since 2019. Meanwhile, the Global Times detailed how Australia’s Albanese government approved the AU $2 billion ($1.38 billion) iron ore joint venture. In September 2022, Rio Tinto announced that it would invest AU $1.3 billion into the Western Range iron ore project. Moreover, the deal specified that Rio Tinto would hold a 54% share in the operation, with Baowu holding the remaining stock.

Western Range’s annual production capacity of 25 million tons should help sustain production of the Pilbara Blend from Rio Tinto’s existing Paraburdoo mining hub. Pilbara Blend products are known for their high-grade quality and consistency. According to the miner’s website, they currently comprise about 70% of Rio Tinto’s iron ore product portfolio. Experts agree that the project represents a new chapter in China-Australia trade relations.

Chinese Firms Remain Confident in Future Steel Production

Days ago, delegates at the China Iron and Steel Association’s (CISA) membership conference told the Global Times that China’s steel industry would remain healthy. In addition to this, representatives cited pent-up demand following the nation’s downgraded epidemic response. They added that the government’s efforts to stabilize supplies and reduce price should provide a boon as well.

The report quoted CISA’s Executive Chair He Wenbo as saying that the steel sector will trend higher in 2023. Wenbo believes the industry will enjoy added support from a stabilized real estate market. Other beneficial factors include the recovery of other steel-consuming industries, including autos, ships, and home appliances. In addition to this, experts now anticipate that the import of iron ore and coking coal from nations like Australia will increase.

Meanwhile, China Steel Corp said it would hike domestic steel prices by up to $39.59 (NT $1,200) per ton for delivery next month. Furthermore, chief reasons for the increase are rising raw material costs and new demand in global markets. Moreover, a report in the Taipei Times projected a pickup in the market for the second quarter. That source cited increasing costs of iron ore and coking coal, new demand in post-COVID China, and Beijing’s tightening control on crude steel production.

Moreover, China Steel continues to argue that its pricing increases are in line with global competitors. Chief among these are US-based Cleveland-Cliffs Inc. and Nucor Corp., South Korean Hyundai Steel Co., and the Baowu Steel Group Ltd. China Steel’s recent price increases follow comparable actions in December last year and last month. At the time, the company cited a strong restocking demand for steel used in machinery, appliances, and automobiles.

By Sohrab Darabshaw

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