MAC: Mines and Communities

Barapukuria Coal-fired Project

Published by MAC on 2006-10-13

INDIA and CHINA

Barapukuria Coal-Fired Project

China is hoping to establish a long-term iron ore supply agreement with India, according to a senior official from China Chamber of Commerce of Metals, Minerals & Chemicals Importers and Exporters. .

"China needs iron ore from India and India needs the Chinese market for its iron ore"

In 2005, China imported 68.55 mln tons of iron ore (worth USD 5.2 bln) from India, accounting for 27.8% of the total China-India trade volume. About 83.13% of India's exported iron ores were sold to Chinese steel makers.

The problem - for China - is that India "has no controlling iron ore suppliers, like CVRD in Brazil and BHP in Australia" , so the world's biggest consumer of iron is hoping that India will set up an iron ore exporter association with which China can negotiate long-term contracts.

"It takes time to achieve that goal," the senior offical told Interfax news service. "But India is certainly a card that China can play when it negotiates with Brazil and Australia. Without the Indian card, China has no alternative if Brazil and Australia raises iron ore prices."

Meanwhile the Sinosteel Group, one of China's largest steel product and raw materials traders, says it's also interested in investing mines, infrastructure, and steel mills in India. India's steel output was around 40 mln tons in 2005, which was only 10% of China's output. Sinosteel will also seek out opportunities to build steel mills, either on its own account or with local partners, and also engage in India's engineering and infrastructure sector . However, "these are long-term plans and whether they would work out effectively largely depends on the improvement of India's investment environment."

In other words: India should lower even further the bar on foreign direct investment

[Commentary by Nostromo Research, London. News source: Interfax China, October 13 2006]

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