It is reported from China News Agency that Asia’s biggest iron ore storage, with reserves of more than 3 billion metric tons, has been found in China’s northeastern province of Liaoning, citing the local government.

The Dataigou deposit, located near Benxi city, has both magnetite and hematite material with iron content of between 25 per cent and 62 per cent, the report said. Benxi government officials were not immediately available for comment.

The discovery may reduce China’s dependence on imports from Vale, Rio Tinto and BHP Billiton. China, the biggest buyer of iron ore, has rejected a 33 per cent price cut accord offered by Rio this year and called for prices to drop as much as 45 per cent because of losses by its steelmakers.

”This could be a low-cost operation for Chinese supply,” said Mark Pervan, a senior commodity strategist at ANZ in Melbourne. ”If they can reduce their reliance on high-cost iron ore imports and look for very low-cost domestic supply, that’s very positive for domestic steel mills.”

Angang Steel, China’s second-largest listed steelmaker, rose 4.9 per cent to 13.85 yuan in Shenzhen tradin. Baoshan Iron & Steel, the largest mill, rose 39 per cent to 7.20 yuan in Shanghai trading. Bengang Steel Plates Co. rose 7.7 per cent to HK$4.90 in Hong Kong trading.

Good for Angang

The find is ”very long term good news for Angang,” Cazenove Asia said in a note to clients. ”Its parent already has the largest iron ore reserves in China, and this potentially doubles it.” The mine could start in four years, the note said.

The reserves at Dataigou are equivalent to the combination of all the iron ore reserves in Liaoning’s Anshan and Benxi areas, the report said.

Angang board secretary Fu Jihui and Benxi Iron and Steel Group’s spokesman Liu Dahong said they didn’t have any information regarding the new deposit.

The cited iron content figures for the deposit suggest it’s ”a high grade discovery for China,” ANZ’s Pervan said. ”In global terms, that’s not very high grade. Brazilian ore has a grade of between 65 per cent and 70 per cent.”

Foreign imports

Mines in China typically have iron content of 20 per cent to 40 per cent, compared with over 60 per cent for production by Vale, Rio Tinto and BHP Billiton at their projects in Brazil and Australia. Rio and BHP each have about 5 billion tons of iron ore reserves at their mines, Pervan said.

China’s reliance on iron ore imports may rise to 70 per cent this year from about half in previous years, the Shanghai Securities News reported yesterday, citing Sinosteel, the nation’s biggest iron ore trader.

ANZ’s Pervan said that Chinese steelmakers have been ”using less domestic supply because the cost of domestic supply is rising quickly”. Imports have jumped because of the closure of high-cost domestic mines, Vale said in April. Mines that started after 2005 are mostly unprofitable, Zou Jian, former chairman of the China Metallurgical Mining Enterprise Association, said April 29. About one quarter to one third of mines in the country started before that period.

It is reported from CCTV today that Chinese steelmakers are unlikely to meet a June 30 deadline for concluding their price talks with suppliers on 2009 iron ore citing unidentified industry officials.

China “will stick to its principles and show patience in the negotiations,” an unidentified official of the China Iron & Steel Association said today on the CCTV telecast.

Chinese steel mills, which bought $60.5 billion of iron ore in 2008, want producers including Vale do Rio Doce, BHP Billiton Ltd. and Rio Tinto Group to cut this year’s contract prices by up to 50 percent to reflect falling steel demand as the economy slows.

It is reported on Tuesday’s China Daily that Jiangsu Rongsheng Heavy Industries Co., China’s biggest private shipbuilder, had won an order to build four vessels (it will be delivered by the end of 2011 or beginning of 2012) worth 484 million U.S. dollars for Oman Shipping Co..

The deal was the biggest foreign order by a Chinese shipyard this year and also the second largest in terms of value Chinese shipbuilders clinched so far this year, only next to a 2-billion-U.S. dollar order won by Zhoushan Jinhaiwan Shipyard Co. Ltd. from a Chinese shipping company.

However, industry analysts said such remarkable new orders do not mean recovery of shipbuilding industry in China because many other shipyards in the country have not received any new order this year.

According to statistics from the Ministry of Industry and Information Technology, new orders placed with the 1,791 major shipbuilders in China decreased by 96 percent year-on-year to 1.18 million dead weight tons (DWT) during the first five months, among which 190,000 DWT were placed in May.

China State Shipbuilding Corporation, has jointly built a shipbuilding company with Baosteel Co. and China Shipping (Group) Corporation in Longxue Shipbuilding Base located in south China’s Guangzhou city, one of China’s three major shipbuilding bases.

The joint venture company, named CSSC Guangzhou Longxue shipbuilding Co., has a registered capital of 2.72 billion yuan, with China State Shipbuilding Corporation, Baosteel, China Shipping each respectively holding 60 percent, 30 percent and 10 percent shares.

The new company is built on a land of 2.53 million square meters and has two super large docks and four 600-ton portal jib cranes.

Its main products cover very large crude carrier (VLCC), Suezmax, Aframax, very large ore carrier (VLOC), large bulk carrier and large container ship. The first phase designed capacity hits 20 ships of 2.12-million dead weight tonnage, while the enlarged capacity could reach 3.5-million dead weight tonnage.

The company has already received 18 ship orders of 4.16-million tonnage for delivery at the end of 2011. By the end of May 2009, it has built seven 308,000-ton VLCCs and 230,000-ton VLOCs, with four in the docks.

The establishment of this joint venture company can help augment the links between China’s steel, shipbuilding and shipping industries, and further develop a new industrial layout through complementary strengths, according to Tan Zuojun, general manager of China State Shipbuilding Corporation.

It is reported from the China Iron and Steel Association (CISA) that its secretary general Shan Shanghua met the counterparts of Brazil’s mining giant Vale and Australian mining company Fortescue Metals Group (FMG) on June 16 and June 18, respectively, to exchange ideas on iron ore cooperation.

Insiders point out the move may hint that CISA will further isolate Rio Tinto and BHP Billiton in the following iron ore negotiation but seek breakthroughs in Vale.

Vale announced on June 12 it hoped to reach an agreement with China on 2009 iron ore price.

However, compared with Australian mining giants, Brazil’s mining companies are less competitive in China for their smaller market share and higher ocean freight for imports to China.

Statistics show that China imported 440 million tons of iron ore in 2008, including 40.5 percent from Australia, 22.5 percent from Brazil and 20.3 percent from India.

Since May, the Baltic Dry Index (BDI), an international composite freight indicator, has displayed rallying trend.

A vice chairman of the CISA said that the global iron ore supply is predicted to outweigh the demand by about 200 million to 300 million tons this year, adding that China should not be worried about being unable to buy iron ore on the spot market.

It is reported that steel mills in Shanxi province have signed long-term contracts with foreign miners for this year’s iron ore supply despite the national steel association banning steelmakers from making individual contracts.

The Southern Metropolis Daily reported on Friday that a number of steel enterprises in the province had already jointly negotiated supply deals with overseas miners, citing Zhu Fengliang, secretary general of the Shanxi Iron and Steel Association.

A local newspaper Shanxi Youth Daily cited unnamed sources from local steel association and steelmakers as saying that some steel mills have recently inked the agreements with three major suppliers, Rio Tinto, BHP Billiton and Vale. It said these mills did not accept the 33 percent cut on last year’s price, which has been agreed by Japanese and South Korean players but it did not elaborate.

The China Iron and Steel Association (CISA), which leads the country’s talks with miners, insisted on a 40 percent cut in the price of iron ore from Australia.

An official with the association said he “has no idea of the deal” by Shanxi mills. Shanxi steel association was also unavailable for comment on Friday.

Earlier reports had said 35 Chinese mills had already signed supply contracts involving 50 million tons of imports with Vale. But the CISA said any individual deal would not be recognized and the government could revoke the import licenses of any enterprise that undermined China’s negotiating position by signing its own supply contracts.

The association is also reportedly seeking to stop Chinese mills and traders from taking part in setting “speculative” prices by taking part in auctions on the spot market.

Chen Ying, board secretary with the country’s leading steelmaker Baosteel, on Friday urged domestic steel mills to take joint actions in the negotiation with overseas suppliers.

China, which produces about 500 million tons of crude steel annually, largely relies on iron ore imports from the Big Three miners which hold 70 percent of the global trade.

Insiders said it implies the association may seek deals with other suppliers. The CISA said on its website on Thursday that it has recently “exchanged opinion on iron ore cooperation” with Brazil’s Vale and Australia’s Fortescue Metals Group.,  with only two weeks to go before last year’s contracts expire.

It is reported that Chinese enterprises were waiting  for overseas M&A gasped at the failure of Chinalco-Rio deal, but apparently, they didn’t decide to slow down the paces.

Days ago, WISCO invested USD 240 million to acquire a 19.9% stake in the Canadian mining company and China Minmetals also successfully merged Australian Miner OZ Minerals. However, experts told Securities Daily that overseas acquisition can hardly leverage current impasse of iron ore talk. China had better cut steel output and enhance centralized purchasing to improve pricing power in the game.

1. Domestic Enterprises Surges Out of Home for Resources

Domestic enterprises speed up expansion this year and surges out of home for resources.

For example, Sinosteel bided for Australian Midwest Co., Hunan Valin Iron and Steel Group bought AUD 1.2 billion of FMG share in Australia too CICC Lingnan companies invested in PEM, Yanzhou Coal Mining Co. has taken over Felix Resources, Zijin Mining has been involved with three overseas mining projects, Zhongjin Gold merged Jinshan Gold Mines listed in Canada and Jien Nickel got 19.95% of Australia’s Metallica Minerals.

Although Chinalco investment in Rio was held back, WISCO still successfully poured USD 240 million in Canada listed Consolidated Thompson on June 9th. Two days later, Oz Minerals agreed 100% asset sale to China Minmetals.

Statistics showed that 80 million tonnes of the total iron ore import is shipped from China-invested mines. Since February 2009, China’s steelmakers and trading companies have strengthened investment on overseas mines especially biding for stakes. According to current paces, China is expected to get over 100 million tonnes of ore resources at abroad.

An analyst of Citic Securities said “This rush of M&A at abroad should be attributed to metal price plunge in last 4Q and credit crisis, which provides opportunities for Chinese corporations to expand at low cost.”

2. To Enhance Centralized Purchase is the Key

Generally speaking, stable self sufficiency and enlarging joint mines at abroad should have increased advantages to China in the dead iron ore talk, but people hold different ideas.

Some insiders said overseas M&A can hardly tackle the negotiation problem in the near future. China should learn the experiences from Japan to unify opinions and centralize purchase in the iron ore talk.

Ping An Securities pointed that at present, China annual iron ore import from mines that Chinese firms invested takes over 12% of the total import, but Japan’s reaches 53.8%. So, Japan certainly could bear higher term prices than China.

In experts eye if domestic mills desire the real pricing power in the negotiation, they must merge or acquire overseas resources step by step to complementary benefit for each other. Besides, mills should also consolidate themselves, cut steel output to change over-capacity situation in order to reduce the waste of iron ore.

Moreover, we should improve cooperation and cohesion with Japan and South Korea mills to hedge out risks from international iron ore price changes. Meanwhile, to seek support from WTO is also needed. The organization can help to protect fairness in the market by just investigation and settlement.

It is reported on April 24th that Hebei Province principally passed Advices on Implementation of National Revitalization Plan in Steel Industry and underlined the point that the percentage of strips was expected to fall down to 10% which might be altered in the formal advices.

Local industrial experts said “To cut the percentage of strips is looked as one of the major problems involved in the advices and generally reflects the intention to regenerate steel industry in Hebei.”

Mr Song Jijun deputy chairman of Hebei Metallurgical Industry Association said

1. Hebei is to adjust the product mix in consideration of the advices of decreasing strips.

2. Hebei is to control total capacity and eliminate obsolete capacity the effective way to control capacity is to sweep out outdated facilities.

He said that according to the calculation, the superfluous capacity nearly reached 21 million tonnes in the province last year. As learned, the capacity of Hebei Steel Group, the 2nd largest steelmaker in China, only recorded at 33 million tonnes last year not too much compared with the superfluous.

However, the target of 10% will be changed, since demands turned better. Mr Song noted strips could be wildly used to make furniture and agricultural mechanics, and those markets are rebounding at present.

Mr Song further noted, “Large mills, boasting technology and capital, should take over businesses of high-end products, while small ones focus on new, special or quality products to improve market shares. He said that in detail, large mills can pin attentions to develop imported products which unable to be churned out in China high end products and special products for national projects, like quality heavy plate for aircraft carrier.”

Mr Song said “For small mills, they should approach the market to decide what to produce, rather than just follow the mainstream.”

The province heads to develop auto steel, special steel and H-beam steel while decreases the shares of strip steel, one of low-end products. And, Hebei Jinxi Steel is picked out to example the advantage of producing high-end products, since the mill, together with the other two largest makers of H-beam steel, carried out production reduction and successfully pulled up H-beam price from CNY 3050 per tonne in March to CNY 3550 per tonne in May.

A spokesman of Rio Tinto said on this tuesday that Rio Tinto Ltd/Plc has begun to restart some capacity (but not starting up to full capacity at this point) at its Tiwai Point aluminium smelter in New Zealand, shut for repair late last year after equipment failure.

In early November last year, the company said output at Tiwai Point had been cut by the equivalent of about 8,500 tonnes per month or 100,000 tonnes per year (tpy) following the failure of an electrical transformer.

Market conditions would determine when the pot line at the 350,000 tpy smelter, producing high purity aluminium for niche markets, would return to full capacity, the spokesman said.

Production at the plant was also curbed from last May to conserve electricity, but improved power supplies allowed the company to restart that output from early October.

Around 15 percent of the world’s global aluminium smelting capacity lies idle because of the slump in demand from the key construction and transport industries.

That figure was nearer 20 percent at one point, but a substantial amount of shuttered capacity in China has since been restarted.

Since early January this year, at 1304 GMT the London Metal Exchange (LME) three-months aluminium price MAL3 was indicated at $1,637/47 a tonne, around its highest.