IRON ORE:

Asia iron ore supply talks ongoing; demand a sticking point:

BEIJING (AFX) - Talks between suppliers and Asian importers for 2006 iron ore contracts are ongoing, with demand projections emerging as a major difference between the two sides, the Securities Times reported, without citing sources.
The newspaper said talks with Chinese importers started on Nov 30, and after two rounds, the parties are still far apart on fundamentals like projected demand.

According to the newspaper, the three major suppliers - Brazil's Companhia Vale do Rio Doce (CVRD) and Anglo-Australian groups BHP Billiton and Rio Tinto - claim that demand for iron ore next year will remain strong, despite falling steel prices.

However, Chinese buyers, headed by Baosteel, expect demand to fall in 2006, as steel prices in China - the world's largest iron ore importer - continue their decline due to overcapacity.
Nippon Steel is adopting a similar position, ruling out any acceptance of higher iron ore prices next year, the report said.
The report added that this year's talks are expected to be much tougher than last year, when suppliers and buyers both acknowledged that iron ore prices should rise in 2005 due to higher demand.

Mittal to Spend $9 Bln in India, Get Iron Ore Supply:

Mittal Steel Co., the world's biggest steelmaker, agreed to spend $9 billion to build a plant in India in return for assured raw material supplies from a country that holds the world's sixth-largest iron ore reserves.
Mittal plans to start construction of the 12 million metric ton plant within the next two years, a statement by the company quoted Chairman Lakshmi Mittal as saying after he signed an accord with the Jharkhand state government in the provincial capital of Ranchi today. The eastern Indian state has assured Mittal of iron ore supplies for 50 years.
South Korea's Posco agreed on June 22 to spend $12 billion on a steel project in neighboring Orissa state, which is also rich in iron ore. Steelmakers worldwide are moving closer to raw materials and expanding to meet demand from China and India.

``Jharkhand is well known for its raw material reserves and good infrastructure and is therefore an excellent location for setting up this type of greenfield venture,'' Lakshmi Mittal said at the signing ceremony. Mittal said India holds opportunity because the per-capita consumption of steel in India is only one- sixth that of China.
The investments into new plants are being driven by surging demand from China, where the economy grew 9.5 percent in each of the past two years, fueling sales of metals to build houses, cars and electronic goods.
Prices for iron ore rose by a record 71.5 percent from April 1, while coking coal prices rose by 120 percent, according to prices negotiated by Japanese steelmakers, a global benchmark.
Capacity
Mittal Steel will initially set up a capacity of 6 million tons in Jharkhand, within four years, and then double the capacity.
The agreement ends almost 5 months of talks as Mittal plans to increase capacity to 100 million metric tons from about 70 million tons.
The Jharkhand government expects the project to create 50,000 jobs, P.P. Sharma, the state's top bureaucrat, said. Mittal will build a road from the plant to the nearest highway. The government will allot coal mines to the company, Sharma said.
India is ``perhaps'' the only place outside of Australia and Brazil that holds sizeable iron ore reserves, Jim Lennon, commodities research director at Macquarie Bank in London, said in an interview yesterday.

`Domestic Consumption'

Rio de Janeiro-based Vale do Rio Doce, London-based Rio Tinto Plc and Melbourne-based BHP Billiton control about two- thirds of the seaborne iron ore industry from mines in Brazil's Amazon Basin and western Australia. Most steel produced by Mittal and Posco in India ``will be for domestic consumption,'' Lennon said.
Mittal Steel was created last year through the combination of Ispat International NV and LNM Holdings NV. The company, which is 88 percent owned by Lakshmi Mittal's family, became the biggest steelmaker after it bought Richfield, Ohio-based International Steel Group for $4.5 billion in April.
India, which has lagged China in attracting investments, drew two of its biggest foreign investments this year in the steel sector. The country will have to provide adequate infrastructure to attract more investors, economists such as A.S. Firoz said.
The three states of Jharkhand, Orissa and Chhattisgarh, which account for 70 percent of the country's coal reserves and 55 percent of its iron ore, need to build roads, railway links and ports to ensure companies are able to import coal and transport steel to customers, Firoz, chief economist at India's steel ministry said.

`Difficult to Support'

``These mineral-rich states will find it difficult to support the mega projects with their present infrastructure facilities,'' Firoz said. ``The fate of these projects will hang in balance'' until the country invests in improving facilities.
Mittal will look at setting up a 2,500 megawatt power plant as it identifies locations for the steel plant, iron ore and coal mines and water sources.
Posco said it will spend as much as $2 billion to build a power station and secure water supply to run the plant and a port and roads to ship out steel from Orissa state, one of the poorest in the nation. India will invest $1.2 billion in the state to build roads and rail link in the state in the next four years.
India's second-largest steelmaker Tata Steel Ltd. plans to build a 12 million ton plant in Jharkhand. The state is also home to Tata's existing 5 million ton mill and Steel Authority of India Ltd.'s 4 million ton plant.

``Since the state can barely support the existing plants, it needs to take up developing roads and rail links on a priority basis,'' Firoz said.
Jharkhand's government is studying the cost of building roads and railway links to mines and ports, Arun Kumar Singh, the state's secretary of mines and geology, said.

``We will ensure that we improve our infrastructure facilities before they begin production,'' Singh said.

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