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Baosteel inks coal import deal with Rio Tinto

By Gao Yuan (chinadaily.com.cn)
Updated: 2011-03-01 17:31
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Baoshan Iron & Steel Co Ltd (Baosteel), China's largest listed steelmaker, signed a long-term coal-import agreement with the Australian mining company Rio Tinto Group, China Business News reported Tuesday.

According to the agreement, Rio Tinto will provide high-quality charred coals to Baosteel for three consecutive years, starting this year, the report said.

Analysts said the deal might indicate that China's demand for imported charred coal is likely to increase in the future. China imported almost no coal at all before 2009, but imported charred coal surged to 34.6 million tons that year. The volume then increased to 47.3 million tons in 2010, despite the increasing import price, the report said.

Similar to iron ore, charred coal is a key material for steel making. It requires 1.4-1.6 tons of charred coal to produce one ton of coke, the report said.

China's charred coal industry was self-sufficient at the point when the financial crisis hit the international coal industry and lowered import prices. Meanwhile, the domestic supply shortage caused by Chinese coalmines' integration process also stimulated the imports, the newspaper reasoned.

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Besides, to save transportation fees was another reason that caused the rise of coal imports. At present, to ship Australia's charred coal to China will cost about $20 a ton, while the transportation fee would be more than 200 yuan ($30.4) a ton to transport Shanxi's coal to Shanghai, an analyst from Mysteel told the newspaper.

With the tightening energy-saving goals implemented by the steelmakers, Chinese mills will need more high-quality charred coal to reduce emissions, said Dou Liwei, head of Anshan Steel and Iron Co's Economic Management Research Institute. As the reviving of international needs for the resource, the imported prices were still higher than the local ones. Thus high-quality charred coal could become Chinese steel industry's next resource bottleneck, Dou added.

More than 55 percent of the international charred coal resource was controlled by the top five providers such as BHP Billiton and Rio Tinto in 2008, the report said.