Chinese steel company Baowu is at the head of a group of steelmakers seeking to develop the massive Simandou iron mine in Guinea, taking over from Aluminum Corp. of China (Chalco) as it seeks to secure supply of the raw material, Caixin Global reported Tuesday.
The state-owned giant wants to develop the iron ore mine after acquiring shares of the project held by Chalco in cooperation with other steelmakers.
China’s steel association and major steelmakers have called for an increase in domestic iron ore production as well as greater investment in exploration overseas to ensure supplies. The country last year produced 56% of the world’s steel.
China is the world’s top iron ore consumer, with its demand set to hit 1.225-billion tonnes in 2020, according to a government think tank. But it has a heavy reliance on imports, having shipped in one-billion tonnes of ore in 2019.
Baowu estimates getting Simandou up and running could require more than $15 billion all told after factoring in the necessary infrastructure build-out, such as a cross-country railroad and deep-water port.
Industry experts widely consider Simandou to be the largest high-grade iron ore deposit in the world, but it has struggled to enter production for years.
Rio Tinto had previously held rights to develop all four blocks of Simandou before being stripped of the rights to blocks 1 and 2 in 2008. Those rights went to a joint venture between Israeli billionaire Beny Steinmetz’s BSG Resources and Vale.
In March, Guinea selected the China-backed consortium SMB-Winning to develop blocks 1 and 2, which holds estimated reserves of more than 2 billion tonnes of high-grade iron ore.
Benchmark iron ore futures in China moved in a tight range on Tuesday, as coronavirus demand uncertainties held back trading ahead of public holidays starting later this week.
The most actively traded iron ore futures on the Dalian Commodity Exchange, for September delivery, closed down 0.3% at 757 yuan ($107.05) a tonne, a second straight loss.
Trading on the exchange will be closed from Thursday for China’s Dragon Boat festival and re-open on Monday.
Iron ore shipments from Australia and Brazil rose by 1.4 million tonnes from the previous week to 26.57 million tonnes for the week ended June 21, data from consultancy Mysteel showed, mainly driven by increase from Australia.
(With files from Reuters)