MELBOURNE (Reuters) - China is looking beyond current suppliers like Australia to procure raw materials in future as its steel demand continues to grow, the chief executive of the world’s No. 4 iron ore producer Fortescue Metals Group warned on Thursday.
Even as clouds gather over the global economy amid the bitter trade war between Washington and Beijing, Fortescue CEO Elizabeth Gaines told an industry event in Melbourne that China still has a considerable way to go before it reaches peak steel usage, predicting robust growth this year.
“Those who think that growth is going to slow, or that China won’t continue to look to develop broader markets for supply would be at risk of underestimating some important factors,” she said, referring to the continuing urbanization of the country.
Gaines’ comments came just a few days after Fortescue confirmed it has submitted a bid to develop two blocks in the giant Simandou iron ore deposit in Guinea, with a government commission expected to come to a final decision in early to mid November, sources told Reuters.
Australia is currently by far the world’s biggest exporter of iron ore, accounting for more than half of global supply.
“We know that there is high grade iron ore there (Simandou) ... it makes sense to look at where those high-grade iron ore deposits are,” Gaines said. “At some point those deposits will be developed, so having an interest in that we think does make strategic sense.”
China still has a way to go before it reaches peak steel usage, which has occurred in developed nations when urbanizations rates hits “well above” 70%, she said. Last year, China’s urbanization rate neared 60%.
“If you’d asked me at the beginning of the year, I would have thought (China’s) steel demand would increase between 2-4%. The reality is, it’s going to end up the full year ... between 7-8%, which still gets it on track to close to 1 billion tonnes of steel production.”
Also, she said, China’s giant ‘Belt and Road’ infrastructure project across Asia is fuelling steel use throughout the region.
Beyond iron ore exploration, Gaines also said Fortescue was investing in hydrogen research, both to cut its own emissions and as it taps the potential for Australia’s next big export market as countries like Japan and South Korea seek paths toward cleaner energy sources.
Australia is due to release a roadmap for developing a hydrogen industry in December.
“We do actually see that over the long term, countries like Japan and Korea who are really focused on developing their hydrogen technology for energy requirements they will be net importers of hydrogen,” Gaines said. “So we see it as an export opportunity.”
Reporting by Melanie Burton; Editing by Kenneth Maxwell
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