Tangshan Steel copes with short iron ore supply

Tangshan Steel copes with short iron ore supply

Tangshan Steel, with its composite productivity of 2.1 million tons for over 100 varieties and 360 specs of steel products, is a key Chinese construction steel products production base. About 40% of Tangshan Steel's product is up to international quality standards, and the company has enjoys fine market popularity in both the domestic and foreign market. Tangshan Steel's products are mainly sold domestically, with northern and eastern China accounting for more than 60% of the company’s total market. The Chinese steelmaker also exports to 23 countries and territories in Asia, North America and Europe. While the 71.5% price surge in iron ore is likely to exert a negative influence on China’s steel industry as a whole, Tangshan Steel has already carried out strategic activities to secure iron ore resources. In 2004, BHP Billiton, the most diversified material manufacturing giant, signed the largest commercial agreement in China’s steel industry. Tangshan Steel, along with several other steelmakers in China including Maanshan Steel, Wuhan Steel and Shagang, acquired a 40% share in an Australian iron ore mine via a cooperative joint venture that grants the companies involved access to a total of 12 million tons of iron ore annually. The US$9 billion 25-year joint venture guarantees Tangshan Steel 3.5 million tons of iron ore resources every year. The agreement not only helps to reduce Tangshan Steel’s production cost, but will also help to improve the company's results over the next 25 years. Tangshan Steel has also cooperated with other companies to construct iron ore mines in two phases. The first phase of construction aims at 7 million tons of annual iron ore productivity. The projected cost of the first phase is RMB 1.6 billion ($193 million). The second phase, costing RMB 2.4 billion ($290 million), has as its goal 12 million tons of productivity, including 4.2 million tons of fines.