Anshan Iron and Steel Group (Ansteel), one of the country's top five steelmakers, will study building steel plants and iron ore processors in Western Australia, the latest attempt by Beijing to expand its sources of raw materials.
The Liaoning-based steelmaker signed a memorandum of understanding with the Western Australian government to conduct 'a feasibility study of steel plants and rolling mills' at the Oakajee industrial estate, near Geraldton in the Mid West region.
The accord followed a visit by Western Australian premier Colin Barnett to Liaoning province last week. Ansteel, which is a major shareholder and joint-venture partner of Australian ore explorer Gindalbie Metals, will work with Western Australia's Department of State Development to conduct the study, according to a statement posted on the state government's website.
Ansteel has a 36 per cent stake in Gindalbie and is jointly developing with that firm the A$1.8 billion (HK$11.49 billion) Karara iron ore project to secure supplies of the steelmaking ingredient to feed listed flagship Angang Steel's expanding capacity.
Garret Dixon, Gindalbie's chief executive, said his company would 'pursue further opportunities for iron ore processing and value adding' of the Karara project.
'Ansteel's move has shown that mainland steelmakers are not only going abroad to seek supply and control of resources but are also trying to build mills in countries that have abundant raw materials,' said Zhao Zhicheng, an analyst at Essence Securities.
Such investment could reduce the transport costs, as it took about 1.6 tonnes of iron ore to produce one tonne of steel, even if it eventually sold the steel products back to China, he said. 'Of course, it is better for mainland companies to build mills in emerging economies which have both raw materials supply and steel demand, such as India and Brazil.'
However, Xu Xiangchun, the chief information officer at steel consultancy Beijing Ganglian Maidi E-commerce, warned that there were many difficulties for mainland firms hoping to build steel plants overseas, because of different legal systems and stringent environmental protection requirements.
They might also need to deal with labour unions and indigenous people, he added.
He said Baosteel Group had dropped a plan to build a plant in Brazil last year, while Sinosteel's plan to build a steel mill in India had not made much progress for years.