Rapid rises in Chinese steel production has surpassed the country’s ability to meet demand, so China must look outward to satisfy demand.
The country is on the hunt for raw materials to feed its steel mills, with iron ore and coking coal top of the menu. Australia’s strength in these commodities and geographic location has made it the target of Chinese investors.
One such deal was made this week between four leading Chinese steel mills and BHP Billiton. The joint venture will secure sales to the mills of approximately 12 million tonnes per annum of iron ore.
The joint venture will be BHP Billiton’s largest ever commercial agreement with Chinese steel mills, with sales of iron ore expected to total US$9 billion over the next 25 years.
The consortium of steel mills included Wuhan Iron and Steel, Maanshan Iron and Steel Company, Jiangsu Shagang Group and Tangshan Iron and Steel.
“We expect the relationship between China and BHP Billiton will provide further opportunities for our other businesses, notably metallurgical coal and manganese,” said BHP Billiton CEO Chip Goodyear.