China Steelmakers Plan Cambodia Investment

Four Chinese steelmakers have agreed to set up a joint venture to explore and develop iron ore mines in Cambodia, seeking to improve their control over supply and pricing.

Wuhan Steel, China's fifth biggest steel mill, is leading the project with a 50 percent stake, with Shanghai-based Baosteel Group taking 20 percent, Wuhan Iron & Steel said in a notice seen Friday on its Web site.

It said Anshan Iron & Steel Group and Beijing's Shougang Iron & Steel Group would each hold 15 percent in the venture, which will explore and develop mines in Cambodia's Preah Vihear province.

The four state-owned steelmakers signed an agreement on the venture in Beijing earlier this week.

"'The steel industry has no choice but to control iron ore resources. The new venture is a strategy by steelmakers to ensure their sustained and healthy growth,"' the notice cited Li Fushun, Wuhan Steel's deputy general manager as saying.

The venture follows exploration of the area by Cambodian companies and China's National Machinery and Equipment Group that found the region may have 2.5 billion tons of iron ore reserves, Wuhan Steel said.

It did not give any financial details of the venture.

Surging Chinese demand for steel has boosted iron ore prices in recent years, prompting Chinese steel mills join forces in seeking ways to control costs.

In December, Chinese steelmakers represented by Baosteel, the country's biggest mill, agreed with major Brazilian ore producer Companhia Vale do Rio Doce SA on a 9.5 percent price increase for iron ore in 2007, down from a 19 percent benchmark price increase in the 2006 contract year and a 72 percent jump in 2005.

The Chinese steel companies have also invested in mining interests in Brazil and Australia.

China is both the world's largest consumer and producer of steel. Crude steel output rose by 19.5 percent to 423 million tons last year - about 35 percent of total production worldwide - and is forecast to climb at a similar rate to 460 million tons this year.