Baosteel vigorously develops raw material business

To enhance the raw materials side of its business, Baosteel has since last year restructured its internal purchasing system and invested more in developing its domestic and overseas supply chains. As a result, the company has of late achieved significant progress. Regarding its domestic raw materials business, Baosteel has established a purchasing center to manage this area of its interests. In addition, a new large subsidiary, Baosteel Trading Company, was set up lately and began operations with a registered capital of RMB 2.4 billion. The major function of this company is to develop raw materials supply. Its major focus will be on domestic trade in raw materials and investment in both domestic and overseas mines. Iron ore, ferroalloys, coal and other accessorial raw materials all fall within the scope of Baosteel Trading's business interests. On Oct. 27, Baosteel concluded a comprehensive collaboration agreement with Henan Coke & Coal Group Co., which is one of the biggest coal and coke manufacturers in China. The latter's annual coal capacity is more than 10 million tons. It is also one of the major miners of anthracite in China. Both parties will benefit from their strategic cooperation. Currently, Baosteel's demand for coal is about 18 million tons every year. This huge demand for coal, and also for anthracite, will receive a powerful guarantee with Henan's backing. Apart from coal, Baosteel has also made progress with regard to iron ore. During Oct. 6-16, a Baosteel delegation again visited the famous Brazil-based iron ore supplier MMX (Mineração e Metalicos), which is considered the only powerful iron ore supplier able to rival CVRD in Brazil. The company owns three independent iron mines - MINAS-RIO, AMAPA and CORUMBA - located respectively in the southern, northern, and mid-western regions of Brazil. Due to its rapid mining of iron ore, the annual output of this company is expected to reach 37 million tons within the next 6 years. During this visit, Baosteel's top officials had a meeting with their counterparts from MMX, mainly to discuss iron ore supply and logistics matters. MMX's CEO Rodolfo Landim and business manager Ricardo Antunes participated at the talks during which the two sides reached agreement on basic cooperation. In Africa where there are rich iron ore mines awaiting further development, Baosteel is also seeking new sources of iron ore supply. Some local iron suppliers have signaled their interest in cooperating with the world's big steelmakers, including Baosteel. Their governments have also shown interest in promoting cooperation both in iron ore supply and in the steelmaking industries. In token of a strong bilateral cooperative intent, on Nov. 1 the prime minister of Angola himself paid a visit to Baosteel. The Angolan government and Baosteel both agreed to establish closer ties of cooperation in the areas of iron ore and steelmaking. It is reasonable to forecast that Baosteel will improve its iron ore supply from Angola and help this country to improve its level of steelmaking technology. Besides its overseas iron ore interests, Baosteel continues to seek domestic ore supplies. Recently, a new collaboration with Guangdong-based iron mines was initiated. Baosteel is likely to invest in the mines and claim shareholder status.