Global Times reported that state owned Sinosteel Corporation refused to comment Thursday on a report about losses incurred at its overseas businesses, but experts said it was another case of Chinese companies failing to conduct due diligence when looking for opportunities abroad.
Sinosteel's three major overseas projects, two in Australia and one in Africa, are facing huge difficulties in either mining or sales, and the investments by the country's second biggest iron ore trading company have generated zero returns.
Sinosteel's press department refused to comment when contacted by the Global Times Thursday, and Luo Yongjun, deputy general manager of Sinosteel Mining Co told the Global Times that he was unable to say anything about it.
In 2008, Sinosteel paid USD 1.4 billion to buy Australia's Midwest Mining, expecting to mine more than 30 million tonnes of iron ore annually.
Mr Zhang Lin an analyst with Beijing-based Lange Steel Information Research Center told the Global Times that "But most of the iron ore turned out to be magnetic, which meant the company had to increase its spending on magnetic separation.”
Sinosteel's mining project in Cameroon has reportedly suffered from a lack of infrastructure for mining and transportation of iron ore.
In 2010, Sinosteel signed another deal, promising to buy 10 million tons of iron ore annually from Brockman Resource's Marillana project in Western Australia, for the next five year period.
Mr Zhang noted that overproduction of steel, the slowdown in the economy, and uncertainty over the real estate industry are the three key factors behind sluggish sales in the steel sector.
According to figures released by the National Development and Reform Commission in October, in the first three quarters this year, crude steel production rose by just 1.7% YoY, 9 percentage points less than in the same period last year.
Mr Sun Fei director of the Chinese Enterprises Overseas Development Center, told the Global Times Thursday that some Chinese companies have not paid enough attention to risk control when seeking overseas opportunities.
Source - Global Times