TALKING POINT: RIO TINTO IRON ORE DEAL ADVANCES CHINA'S SUPPLY SECURITY STRATEGY
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The partnership agreement between leading Australian iron ore producer Rio Tinto and state-owned steelmaker China Baowu Steel Group to develop the new $US2B Western Range project represents another key step in China's efforts to secure its long-term supply.
Baowu will hold a 46% stake in Western Range, which is expected to deliver 25Mtpa over about 13 years, which matches the interest it has held in the producing Eastern Range mine for over 20 years.
The largest Chinese steelmaker also has a history as a customer for Rio Tinto's Pilbara, WA iron ore production going back to 1973. It has been the largest global customer since 2019.
Baowu has also committed to acquiring up to 126.5Mt of Western Range production, matching its 46% interest in the total 275Mt forecast.
Leading English language newspaper China Daily links the new Rio Tinto deal to a pattern of the country's steel mills investing in overseas mines to ensure adequate future raw materials supply.
It quotes Bloomberg Intelligence senior analyst Zhu Yi as saying China relies on imported iron ore for more than 70% of its needs.
"Domestic mines have comparatively lower grades and higher production costs compared to their global peers, causing steel mills to go overseas for the raw material," she said.
With its abundant resources and relative proximity, especially compared to major competitor Brazil, Australia accounted for 67% of China's total imports in January-July.
Bloomberg Intelligence data showed Australia supplied 55% of total Chinese iron ore imports in 2021, compared to Brazil's 19%, and 61% in 2020, compared to 20%.
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