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Rizhao port restructures to rely less on iron ore imports

By Andrew Moody (China Daily)
Updated: 2009-08-10 08:19

One of China's leading ports will restructure its operations to become less reliant on iron ore imports that have slumped in recent months.

Rizhao Port Group, which operates the country's leading iron ore port, has been hit hard by the protracted wrangling between China and the world's major iron producers over the price of the raw material.

These events culminated in the so-called Rio Tinto Affair last month, when four executives from the Australian mining company were arrested in China.

The port currently relies on iron ore imports for two-thirds of its business, but the volume delivery is set to dive by 50 percent next month as steel producers sit on stocks waiting for the price issue to be resolved.

Zang Dongsheng, vice general manager at Rizhao Port Group, said the Shandong port operation will be switching its focus to be less exposed to the currently volatile iron ore market.

He said that by 2015, iron ore will make up a third of the delivery capacity, with the port moving emphasis to its oil and container businesses.

"It is to give a broader base to the port so it is less dependent on iron ore. It is right to adjust the structure, because if you are dependent on one product such as iron ore and the delivery of it declines sharply you will suffer a lot. What you need is a very good balance," Zang said.

Special Coverage: Iron Ore Price Talks Related readings:  Smaller steel mill owners in limbo  Iron ore price negotiation still underway: CISA  CISA suggests agent body on iron ore imports  Steel lobby official takes tough stand on iron ore pricing talks  New iron ore pricing plan soon

The port company reported late last month that its iron ore imports were set to fall by up to 50 percent in September, compared to the average of the first six months of this year. This month they are expected to be 40 percent down.

This dramatic collapse was blamed on the failure to reach agreement on a contract price between the major Chinese steel producers and the world's major iron ore producers: the Australian mining group Rio Tinto, the British-Australian giant BHP Billiton and the Brazilian company Vale.

As part of its restructuring plan, the port group will build two new crude oil wharfs with a capacity of 300,000 tons, the first of which will be ready next year. The existing wharf has a capacity of 100,000 tons. It is also going to invest heavily in its business of loading and unloading containers, increasing the number of the standard boxes it handles more than fivefold from its current 900,000 to 5 million boxes in five years.

The port will still be investing in its iron ore facilities, investing 1.6 billion yuan in a new iron ore berth at its Lanshan Port. The port plans to complete work on the project next year.