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December 02, 2008


Chongqing to expand domestic iron ore base to match expansions

It is reported that Chongqing Iron and Steel Company Limited has started construction of an iron ore base in the city's Ba'nan with total investment of CNY 250 million. The base is expected to produce 400,000 tonnes of crude ore and 200,000 tonnes of ore fine and realize industrial output value of CNY 120 million.

It will become an important raw material supply base for the steel maker. Insiders say this move can bless the steelmaker to shake off pressure from rising imported iron ore price as well as surging ocean freight rate.

Chongqing Iron and Steel already owns Taihe Iron Ore Plant in Sichuan's Liangzhou but its capacity is about 2 million tonnes and Chongqing Iron and Steel Company will pour CNY 10 billion to expand its capacity to 5 million tonnes. Besides it has resumed iron ore plant in Qijiang and is seeking resources in regions such as Nanchuan, Wushan and Ankang.

Chongqing Iron and Steel will finish the relocation in 2010 with capacity expanding from 3 million tons to over 5 million tonnes. This means it will demand more iron ore. However, in the past among the 5 million tonnes of iron ore it consumed, over 60% is from overseas. Its own mines merely provided 10%. According to an official of Chongqing Iron and Steel, Chongqing Iron and Steel aims to realize self sufficiency for over 6 million tonnes of crude ore and seek over 70% of raw materials from home market by 2010.

The steel maker will increasingly rely on imports if it does not expand its ore mines. On the other hand, price for imported iron ore is soaring. Global institutions and iron ore giants all expect tight iron ore supply and price hike next year.

Chongqing Iron and Steel is one of China's biggest medium plates producers. It is famous for vessel plate, boiler plate and shipbuilding plate. Its boiler plate occupies a market share of over 11%; shipbuilding plate, over 13%. Medium plates, the key products, contribute over 44% to the steel maker's business income and over 70% to the profit.

(Sourced from MySteel.net)