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Iron ore discovery pushes up steel stocks

CHINESE steel stocks rose yesterday after a report said Asia's largest iron ore deposit had been found in northeast China's Liaoning Province.

The Dataigou deposit in Benxi City holds reserves of more than 3 billion tons, the China News Service reported, citing the Benxi government. That could double with further prospecting.

Iron ore is the key steel making ingredient of which the Chinese steel industry relies on imports for more than half its needs. The find may help China reduce dependence on global miners, including Brazil's Vale and Australia's Rio Tinto and BHP Billiton.

Baoshan Iron and Steel Co, China's top listed mill, rose 3 percent to 7.20 yuan while Wuhan Iron and Steel Co gained 2.22 percent to 8.29 yuan in Shanghai trading. Benxi-based Bengang Steel Plates Co soared the maximum 10 percent to 7.48 yuan while Anshan, Liaoning-based Angang Steel Co jumped 7.42 percent to 14.18 yuan on the Shenzhen Stock Exchange.

China News said the Dataigou deposit was as big as existing iron ore reserves in the Anshan and Benxi areas.

Exploration of the new find is being co-financed by Benxi Iron and Steel Group and several other stakeholders, but it would take many years before it could be mined, an official at Liaoning's geology and mineral resources bureau said.

Analysts said gains in the steel sector could be short-lived as investors may have overreacted to the news.

The find won't help China in this year's iron ore contract price negotiations, said steel sector consultant Ma Zhongpu at

China is deadlocked in the annual negotiations with global miners, refusing to accept prices other Asian mills have agreed on.

A China Iron and Steel Association official said recently that an agreement was not expected to be reached by the end of this month.


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