Interview 4: Iron Ore Business

Interview 4: Iron Ore Business

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With the effect of publicity in the World Cup and the Shanghai World Expo, South Africa has become a well-known country which is located in the southern hemisphere, basically at the other side of the planet. In 1998, South Africa and China established the diplomatic relations in ambassador level. Since then, the heads from the two countries have founded a favorable relationship along with mutual exchanges. The economic ones before the establishment of diplomatic relations have exerted an integral role in the development of the major industries of the two countries. This time, let's pay attention to the work of Ore Section of Mineral Resource & Energy Department No.2 in Sumitomo Co., (China) Ltd. (hereafter referred to as Sumitomo Beijing), linking the steel & iron industry in China and mining industry in South Africa, which are the backbone of the two countries

1.Challenge the huge market

The number of 620 million tons, do you know what this figure means? It represents the total amount of China's iron ore imports in the year 2009. As the world's factory, China's car production has been ranked first in the world with intensive manufacture and infrastructure construction being continuously improved with the center of west development. China becomes a concentration of the world "resources". Many industries besides steel industry demand for iron ore, making that China the world's largest importer of iron ore. Therefore, as a huge market of iron ore, China has become the forefront of the fierce competition between world's countries with resources and companies with iron ore.

There are four famous iron ore countries of origin, namely, Brazil, Australia, India and South Africa. And among them, the imports of iron ore from Brazil, Australia and India account for nearly 80% of China's total imports. In addition, iron ore imports account for more than half of China's iron ore consumption. Hence, China is known as "the world magnet".

Annual amount of South African iron ore imported by of Sumitomo Beijing is about 4 to 5 million tons, which is not yet 1 % of China's total imports per year. Although South African iron ore has entered the Chinese market since 1990s, from the point of view in quantity, it is far less than that of Brazil, Australia and India. With the situation of strong domestic iron ore production, can its sale be further expanded? In fact, there is a great possibility that is embedded in the development of China's iron & steel industry.

Iron Ore Business

2.Build the bridge across 18000km distance

Entering Sumitomo Beijing in 2001, Manager Zhang Qingshan in Ore Section is responsible for the business of iron ore imports. Sumitomo Beijing's partner in South Africa is one of the two major iron ore companies there, Assmang Limited (hereafter referred to as Assmang).

Since 1993, Sumitomo Beijing has begun to get involved in the business of South African iron ore exports to China with the engagement in the sales agent. Besides iron ore, it also provides such raw materials with high value and quality as manganese ore for China. On one hand, the section which Manager Zhang belongs to carries out transactions with Assmang through Sumitomo Corporation (Johannesburg) Ltd (hereafter referred to as Sumitomo Johannesburg); on the other hand, it enters into negotiations with large steel companies in China. "Due to the scale of production, the trading amount of iron ore with Assmang is less than that of other large mining companies. The large steel companies in China, however, deeming that Assmang produces iron ore with high quality, hope to increase the supply." views

As for the expectation from large domestic steel companies in China, Manager Zhang explains to us about the quality of different types of iron ore, and manganese ore that Sumitomo Beijing imports. He says, "They attach great importance to the quality of their products so they always pursue the raw materials with higher quality. They think the high-quality iron ore Assmang produces is in line with their requirements, with less moisture content and high iron content. As the quality of iron ore in other areas has declined, Assmang, with its high-quality production, has a great advantage in this regard. In addition, the demand for manganese ore, which is used to smelt high-quality steel, is also increasing in the Chinese market. While the reserves of manganese ore in South Africa account for 80% of the world, 60% of the qualified ones is from Assmang. We have high expectations of it." The subject which Manager Zhang learnt is "material engineering", so he exerts a profound understanding of the expectations from large steel companies in the pursuit of raw materials with high quality.

As for Assmang, how does it think of Sumitomo Beijing? He says, "Assmang truly trusts Sumitomo in Beijing and speaks highly of such aspects as market research, sales and price negotiation, and so do the large steel companies in China. Assmang has high expectations of the Chinese market and considers China as a pretty good trading partner." As a comprehensive trading company, Sumitomo has received coherent trust of both South African and Chinese partners, which becomes the tie connecting the relations between the two countries.

Next Page >>
Interview 1: Wheat Flour Business
Interview 2: Fertilizer Business
Interview 3: Sulfuric Acid Business
Interview 5: Coil Center Business
Interview 6: Cosmetics Business
Interview 7: Real Estate Development Business