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Sojitz Ties Up With Shagang to Tap China Steel Demand

Dec. 28 (Bloomberg) -- Japan’s Sojitz Corp. said it teamed up with Jiangsu Shagang Group Co., China’s largest privately owned steelmaker, as demand increases in the world’s biggest market for the alloy.

The alliance will cover supplies of iron ore and factory equipment, Kenji Asano, general manager at Sojitz’s steel business department, said in an interview at the company’s Tokyo headquarters. The accord will also include joint development of the Southdown iron ore project in Western Australia, he said, without giving financial details.

Sojitz, Japan’s sixth-largest trading company, is targeting mills in China, which produces half of the world’s crude steel. Iron ore imports by China rose 26 percent last month to the second-highest this year as steelmakers restocked on expectations prices will rise.

“We’re seeking to expand our business opportunities by getting involved in a wide range of fields,” Asano said yesterday in the interview.

Sojitz shares gained 0.6 percent to 171 yen at the 3 p.m. trading close on the Tokyo Stock Exchange.

The Southdown project, 70 percent owned by Grange Resources Ltd., Australia’s largest iron ore pellet producer, and the rest by Sojitz, is slated to start operations in 2014, Asano said. Shagang holds a 47 percent stake in Grange, according to data compiled by Bloomberg.

An initial feasibility study is expected to be completed by the end of March, Asano said. The Southdown mine is forecast to yield about 10 million metric tons a year and the partners are in talks about how the production will be divided, Asano said.

Shagang will probably take about half the output, while Sojitz wants more than 30 percent to sell in Japan and China, Asano said.

To contact the reporters on this story: Masumi Suga in Tokyo at msuga@bloomberg.net; Ichiro Suzuki in Tokyo at isuzuki@bloomberg.net.

To contact the editor responsible for this story: Andrew Hobbs in Sydney at ahobbs4@bloomberg.net.

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