- Minmetals' development was facing difficulties, chairman says
- Cooperation seen possible in metal-trading, overseas projects
China’s biggest state-owned metals-trader and its top copper smelter agreed to forge a stronger partnership as the downturn in the global economy and falling commodity prices spur resource companies to seek allies.
China Minmetals Corp. and Jiangxi Copper Co. signed a strategic cooperation agreement on areas including copper-trading and the development of overseas resources, according to a statement on Minmetals website on Thursday. The pact was signed on Wednesday at Jiangxi Copper’s headquarters.
Commodities slumped to the lowest level in 16 years last month as slowing growth in China and gluts of raw materials pummeled metals and energy, cutting share valuations of powerhouses such as Glencore Plc. Minmetals was facing difficulties amid the global slowdown, so the company had to extend cooperation with other groups, Chairman He Wenbo said, according to the statement. The two companies could also strengthen ties in logistics and the financial sector, Jiangxi Chairman Li Baomin said in the same statement.
‘Hug Each Other’
“It’s wise for resource companies to hug each other and share the warmth amid the current weak market,” said Heng Kun, Beijing-based chief analyst at Essence Securities Co. “Such cooperation would lower risks and promote expansion for each other, such as sharing investments for mega projects.”
While the companies have a track record of working together, they’ve also competed. In 2007, they teamed up to purchase Northern Peru Copper Corp. Last year, Minmetals led a group that took over Glencore’s Las Bambas project in Peru as Jiangxi Copper was part of a separate consortium that didn’t succeed.
Copper has been mauled by the slowdown in China, sinking 19 percent this year to $5,077 a metric ton on the London Metal Exchange. Goldman Sachs Group Inc. forecast in a report this week that global surpluses may last for years, predicting a drop to $4,500 a ton by the of 2016.
Minmetals is the parent of MMG Ltd., which also owns zinc assets in Australia. Jiangxi Copper, which produced 1.02 million tons of refined copper last year, has units listed in Shanghai and Hong Kong. Jiangxi also owns trading house Jiangxi Copper International Trading Co., while its futures unit, Jinrui Futures Co., is one of top copper futures brokers in China. The two companies purchased Northern Peru Copper Corp. in 2007.
MMG dropped 0.6 percent to HK$1.56 in Hong Kong, while Jiangxi’s Hong Kong stock fell 1.9 percent to HK$9.70 as the benchmark Hang Seng Index declined 1 percent.
— With assistance by Alfred Cang