China is planning a state-backed iron ore company to oversee everything from massive mine investments in West Africa to buying the steelmaking material from global suppliers, according to people familiar with the matter.
Top leaders in Beijing have a vision for the new entity to assume broad responsibility for raw materials supplies to the country’s sprawling steel industry, by far the world’s biggest, said the people, who asked not to be identified as the information is private.
The plan would mark China’s biggest effort yet to tackle what its officials have long argued is the excessive pricing power wielded by miners including BHP Group Ltd. and Rio Tinto Plc. China spent about $180 billion on iron ore imports last year.
The new entity would house outbound investments such as the Simandou iron ore project in Guinea, seen by the China’s leaders as the best route to ease the steel industry’s reliance on Australian ore. It would also ideally become the sole channel for buying imported iron ore from third parties, most of which comes from either Australia or Brazil.
Bloomberg reported in February that China was planning a centralized purchasing platform for iron ore imports. Plans for a new state-owned company to handle iron ore imports and overseas investments were reported by the Wall Street Journal last week and Caixin on Monday.
The plan has been under consideration for years with the backing of senior leaders, the people said. At the very least, it will be a vehicle to consolidate several overseas iron ore investments including Simandou, as well as raw materials purchasing for a handful of China’s biggest state-owned steelmakers.
The establishment of the firm is seen progressing this month after Yao Lin, the chairman of Aluminum Corp. of China and a key organizer of the iron ore firm, left Chinalco. Yao and Guo Bin, executive vice president of China Baowu Steel Group Co., will lead the new company, which will be directly under China’s State-Owned Assets Supervision and Administration Commission, said the people.
China’s State-owned Assets Supervision and Administration Commission and National Development and Reform Commission didn’t immediately reply to faxed requests for comment.
The development of Simandou in Guinea has repeatedly been delayed by legal disputes and government changes in Guinea. The reserve holds one of the world’s largest untapped reserves of iron ore and is divided into four blocks, with 1 and 2 controlled by the consortium backed by Chinese and Singaporean companies, while Rio Tinto and a joint venture between Chinalco and Baowu own blocks 3 and 4.