Baosteel to Buy Stake in Fortescue
China’s largest steelmaker Baosteel Group, which has signed a 10-year iron ore contract with Fortescue last year, may buy a stake in Australian iron ore miner Fortescue Metals Group Ltd to ensure stable raw materials supply.
“Baosteel will seek a stake in Fortescue when both sides reach an accord on a number of things, including common goals, development strategy and market positioning,” said Xu Lejiang, chairman of Baosteel Group, yesterday at Baosteel’s Majishan Port in Zhejiang province, where he received the first shipment of 170,000 tons of iron ore from Fortescue.
Having already signed contracts with 33 large and medium-sized Chinese steel manufactures for at least 10 years, the third largest iron ore supplier in Australia said it welcome direct investment by major Chinese companies. Furthermore, with most of its iron ore to be sold in China, Fortescue expects to increase annual production capacity to 100 million tons in 2010.
“The Chinese industrial champion takes Fortescue very seriously, and we will encourage its participation in the future of Fortescue,” Andrew Forrest, founder of Fortescue, was quoted by Reuters as saying yesterday.
Liu Yanqi, an analyst at Haitong Securities, said, “The possible alliance is expected to strengthen Baosteel’s power in iron ore price negotiations with Australian miners, such as Rio Tinto and BHP Billiton.”
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