China's leading raw materials and service provider Sinosteel Corp yesterday signed a deal with the nation's largest steelmaker Baosteel, amid an industry push to consolidate.
Under the agreement, the two companies will boost cooperation on the supply of iron ore and chrome ore, ferroalloy and mining equipment.
They will also work to develop local and overseas resources, technologies and services.
"It is good for integration in the steel industry and good for its sustainable development," said Huang Tianwen, president of Sinosteel.
Huang said the company is also preparing for an initial public offering (IPO). "The State Council has approved our IPO plan, and we have started preparing for it," he said.
Baosteel has a long-time partnership with Sinosteel and the deal marks a new phase for the two companies in areas like raw materials supply, said Xu Lejiang, chairman of Baosteel.
Media reports on Tuesday said Baosteel is considering a takeover bid for Rio Tinto. But Xu yesterday denied the reports, saying the company has no such plan.
"BHP Billiton's takeover offer for Rio Tinto Group is a very big deal in the global mining industry. If approved, it will have a big impact on the total industry," he said. "We are now also considering the possible impact on us."
Steelmakers outside China, in Europe and Japan, are also considering the possible impact, he said.
Australia's BHP Billiton, the world's largest mining company, has put in a bid for its rival Rio Tinto, the world's No 3 miner, for more than $120 billion.
Rio and BHP are the dominant iron ore miners in Western Australia's Pilbara region, the world's single largest deposit, shipping hundreds of millions of tons annually to steel mills in Japan, South Korea, and increasingly to China.
The iron ore price has seen over 100 percent growth since 2004. The local steel industry is encouraging consolidation to increase its competitiveness, which means more mergers and acquisitions, said Liu Zhenjiang from the China Iron and Steel Association.