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Chinese steel companies are striving to be the "Australian miners" signing more mining agreements
In the days leading up to and following the APEC summit, several top Chinese steel companies, including Anshan Iron & Steel, Baosteel, Shagang, and Sinosteel, engaged in discussions with major Australian iron ore producers. Some of them signed mining agreements, marking a new phase in their overseas resource acquisition strategy. This wave of activity is seen as a significant shift in how Chinese steelmakers are securing their raw material supply.
This marks one of the most concentrated and large-scale efforts by Chinese steel enterprises to acquire Australian iron ore assets in recent years. For instance, in late August, Jiangsu Shagang Group signed a preliminary agreement with Stemcor Holdings to acquire a 90% stake in the Savage River iron mine in Australia. On August 28, Baosteel announced a joint venture with FMG, Australia’s third-largest mining company, to explore and develop a magnetite deposit targeting 1 billion tons in Western Australia. Then, on September 4, Sinosteel and Rio Tinto extended their Chana Joint Venture agreement, ensuring continued access to the Chana Mine. Finally, on September 6, Anshan Iron & Steel partnered with Jindabi to form Carrara Mining Co., aiming to jointly develop the Carrara Iron Mine.
Within just over 10 days, these Chinese steel giants moved swiftly, signaling a strategic shift in their approach to securing iron ore supplies. With iron ore negotiations about to begin this year, what does this aggressive expansion mean for China's steel industry?
This series of overseas moves represents a more focused and coordinated effort compared to previous years. Historically, Chinese steel companies have pursued smaller, fragmented projects in Australia. However, this time, the scale and timing of the deals suggest a more mature and strategic approach. For example, while past investments were often exploratory or limited in scope, this round involves substantial commitments and long-term planning.
Another notable change is the diversification of participants and investment methods. Shagang, a major private steelmaker in China, took an aggressive approach by acquiring a controlling stake in an Australian mine. Meanwhile, other companies like Baosteel and Anshan formed joint ventures with foreign partners, showing a broader range of strategies.
It's also worth noting that Baosteel and Anshan, two of China’s largest steel companies, are now operating multiple mines in Australia, working with different local partners. This helps balance their relationships with local miners and reduces dependency on any single supplier.
Australia, with its vast iron ore reserves of around 40 billion tons, has become a key player in the global mining sector. Despite the low-key nature of these deals, Chinese steel companies are rapidly becoming one of the most influential forces in Australia's mining industry, surpassing traditional players like Japan’s Nippon Steel and South Korea’s Pohang.
But how much of a gap still exists in China’s iron ore imports? Although domestic production has grown significantly—from 108 million tons in 2002 to 270 million tons last year—China still relies heavily on imported ore, with imports accounting for roughly 50% of total demand. While the growth in imports has slowed compared to previous years, the need for stable supply remains urgent.
Experts suggest that while overseas mining can help China gain more control over its supply chain, it’s still a long-term strategy. The current overseas capacity is far below the level of annual imports, so there’s a long way to go before China can fully reduce its reliance on foreign sources.
At the same time, risks remain. Overseas mining involves not only geological challenges but also political, economic, and regulatory uncertainties. Projects in regions like Africa and India, though rich in resources, come with their own set of risks, such as unstable governments and currency fluctuations. These factors must be carefully managed to avoid losses.
In conclusion, while the recent push into Australian mining is a positive step, it’s just one part of a broader strategy. To truly secure its iron ore supply, China needs to continue investing in overseas resources, diversify its sources, and build a resilient, long-term system for sourcing raw materials. Only then can it better negotiate from a position of strength in the global iron ore market.