It is reported that China’s steel industry voiced opposition to a proposed joint mining venture between global mining giants Rio Tinto Ltd and BHP Billiton Ltd and called for global opposition against it.

The world’s No. 2 and No. 3 in the iron ore market signed binding agreements earlier this month to combine their Western Australian iron-ore assets, with expected savings of at least US$10 billion.

“This is a monopoly in a disguised form, and it will greatly threaten the development of the global steel industry,” the China Iron and Steel Association said in a statement posted online yesterday.

It called for countries to “block any attempt at a monopoly by Rio and BHP” by taking anti-monopoly measures.

China’s Ministry of Commerce said on Wednesday that it hadn’t received regulatory review applications from the two companies.

Australia is a key supplier of iron ore and other resources for China’s fast-growing economy.

China, the world’s largest iron ore importer, failed to reach an agreement with suppliers in price talks this year after the association insisted on a deeper price cut than Rio and BHP had agreed with other Asian countries.

Industrial analysts expect iron ore prices to rise about 10 to 20 percent next year on increasing demand as the world’s economy recovers.

Rio and BHP said submissions had been made with both the European Union and the Australian Competition and Consumer Commission, and they expected to complete the deal in the second half of next year.

Last month, European steel makers called for EU antitrust regulators to investigate the project. In 2008, EU opposition to a hostile bid by BHP for Rio Tinto forced it to abandon a takeover attempt.

It is said from its chairman on Friday that China’s top listed steel firm, Baoshan Iron and Steel Co Ltd or Baosteel, will consider mergers and acquisitions in the industry and look out for opportunities to invest abroad.

Xu Lejiang told reporters on the sidelines of a conference that there were not many opportunities for Baosteel to develop through building new production capacity.

Baosteel can only move forward by participating in M&As in the industry and through partnerships and was also looking abroad for opportunities.

It is reported from 21st Century Business that Copper processing fee talks between Chinese smelter operators and overseas miners are stalled amid diverging price expectations.

Overseas miners insisted on $43 a metric ton to have ore smelted whereas Chinese producers asked for $60, the Chinese language newspaper said, citing Jiangxi Chief Financial Officer Gan Chengjiu. Chinese smelters need a fee of $66 to break even, 21st Century cited Gan as saying.

Jiangxi is leading a team of Chinese smelter operators in talks with miners including BHP Billiton Ltd. for annual fees for next year, it said.

According to the latest statistics released by the Ministry of Industry and Information Technology, China’s gold output increased by 31.47 tons or 14.10% year on year to 254.55 tons in the first ten months of this year.

In October alone, China produced 26.35 tons of gold, said the MIIT.

In the period from January to October, gold mines in the country produced 211.60 tons of gold, up 14.70% year on year, while by-product gold from non-ferrous smelters grew11.25% to 42.96 tons, said the ministry.

In the same period, China’s top five gold producers, including China National Gold Group Corp and Zijin Mining Group Co Ltd, saw output rise 10.93% from a year earlier to 100.61 tonnes, accounting for 39.53% of the country’s total.

The gross industrial output value of the gold industry climbed 7.40% year on year to RMB 107.9 billion in the period, while the sector’s profit dropped 0.49% to RMB 10.69 billion.

It is reported that Australian Mines (ASX: AUZ) has taken a significant step in its strategy to mine gold at Mt Martin mine near Kalgoorlie after successfully completing a capital raising for $910,000.

The funds will supplement further definition and extension drilling of the current resource at the Mt Martin gold mine, which it will regain control and ownership of from Dioro Exploration (ASX: DIO) in January 2010.

The capital raising was over- subscribed and raised $910,000 at 0.1 cent from sophisticated investors including a new cornerstone investor who was issued 45% of the placement.

Placement shares are expected to be allotted on 24th December 2009.

The Mt Martin mine, located 40 km from Kalgoorlie, has historically produced ~200,000 ounces of gold. At present, the mine has some 213,000 ounces of gold resources across two deposits, Mt Martin and the adjacent Swift deposit.

Dioro Exploration currently holds the sublease to Mt Martin, which it acquired when it purchased the South Kalgoorlie Project from Harmony Gold and, during 2009, conducted an open pit operation at Mt Martin, recovering in excess of 15,000 ounces of gold. The sublease is set to expire on 25 January 2010, at which time Australian Mines will resume total control of the mine.

Executive Director Brett Young said Mt Martin would now become the primary focus for the company going forward.

“Mt Martin already has a JORC-compliant gold resource, as well as several ready-to-drill targets which will expedite exploration activities,” Mr Young said.

“The mine is ideally located near to the largest gold mining centre in Australia and toll milling treatment facilities, in a region that we have been operating in for many years now.”

He said the funds raised by the placement would increase the company’s cash position and enable it to commence a drilling programme at Mt Martin and Swift following formal handover of the project in January.

Investors who put their money in gold exchange-traded funds (ETFs) are smiling their way to the bank. Gold ETFs have outperformed physical gold with returns of 30 per cent in a year, while physical gold has so far gone up only about 23 per cent (average on an annualised basis) in the same period.

Though physical gold has gone above Rs 18,000 per 10 grams recently, on average it was at Rs 15,400 per 10 gram in 2009 from Rs 12,500 in 2008. Dhirendra Kumar, CEO, Value Research, said, “Realising better returns, now some of the gold ETFs have attracted investors to invest in ETFs more than any other funds. Recently, some exchange-traded fund companies such as Gold Benchmark, Kotak Gold, Quantum Gold, Reliance Gold, SBI Gold and UTI Gold have shown their performance with a rise of as much as 30 per cent in one year’s time.”

Just more than two-year old gold ETFs — instruments that can be traded like shares — are backed by physical gold holdings. As the country’s gold collection under exchange-traded funds rose 32.9 per cent a year to 7.4 tonnes in November, industry sources said, this new segment would gain more popularity with some more funds planning to enter the market.

“In the mutual fund space, we avail only two distinct kinds of gold-related funds. The first one is gold ETFs, which closely track the price of gold itself and deliver profits and losses that mirror investing in physical gold. The second one consists of a couple of equity funds (one from AIG and the other from DSP BlackRock) that actually invest, not in gold, but in foreign gold-related stocks, like those of gold mining and processing companies,” Kumar said, adding, “Over the last one year, gold has gained 44 per cent (year-on-year basis), but these funds have gained more than twice that.”

Kumar said, “All the ETFs deliver identical returns. Unlike an investor in equity or equity-backed products, there aren’t hundreds of choices.” Jaydeep Bhattacharya, chief marketing officer, UTI Mutual Fund said, “In the long term, bulls think the metal will continue to shine. Gold has been proved to be a historic store of value and an inflation hedge. I think it is an asset class, not just a trade. As far as gold fund is concerned, for last three months and six months we have seen 6.83 per cent and 17.3 per cent rise of returns respectively in absolute term and it may be doubled on an annual basis.”

Hiren Dhakan, mutual fund analyst, Bonanza Portfolio said, “The US dollar and gold share universal correlation with each other. Gold isn’t a bubble. Although it has gained of late, the dollar remains weak, the stock market has run up more than fundamentals support, and a lot of people haven’t invested in gold yet. That suggests gold ETF investors should stand apart.”

It is reported from UK-refiner Johnson Matthey that Chinese jewellery demand has been tremendously strong in 2009. But how long can it keep on growing?

It’s been clear that China’s demand for platinum has been exceptional in the last 12 months. There are two key and relatively timely sources of data about the Chinese market – the country’s imports of platinum, both direct and via Hong Kong, and turnover on the Shanghai Gold Exchange (SGE). Both have been very strong since Q4 2008, and that has continued through most of 2009. The chart below shows net imports of unwrought platinum into China & Hong Kong since the start of 2008.

After a rather subdued first nine months of 2008, on the back of the extremely high platinum price and restricted supply (due to the power crisis in South Africa), China’s demand really took off in September 2009 as the price crashed, and has remained strong ever since. It dipped in June this year but has slowly recovered. October data is only available for direct China imports, and this shows these falling back to 79,048 oz, the lowest since December 2008.

In total, these add up to 1.7 Moz in 2008 (of which nearly 900,000 oz came in the last three months) and 2.3 Moz in 2009, up to the end of September. Even if imports were to slow to a rate of 150,000 oz a month for the last three months of 2009, that would still imply 2.75 Moz for the full year. It’s possible that some of this data is less than totally reliable – Swiss exports to China do not always tally with recorded Chinese imports from Switzerland, for example – but the trends are clear.

A similar tale is shown by the cumulative turnover on the Shanghai Gold Exchange’s platinum contract. By end-November this year the cumulative total traded in ounces (having halved the total to remove double-counting) was 838,299 oz, far in advance of the previous highest level at this stage of 2008, when it was 632, 952 oz.

These volumes are lower than those recorded by imports, as not all platinum that enters China, and even more so Hong Kong, goes through the Shanghai Gold Exchange. Nevertheless, as the following charts show, the trends have been similar.

Both measures suggest that, even allowing for some slowdown in December as higher prices have begun to bite, China’s platinum usage will be much higher in 2009 than in 2008. The data however cannot tell us how much goes into jewellery as opposed to autocatalysts, glass, electronics and chemicals. In November the UK-based refiner Johnson Matthey (JM) suggested that total demand (from all sources) of platinum in China in 2009 would be 2 Moz, 66% higher than 2008. Of this they estimate 1.75 Moz1 will be jewellery, up from 850,000 in 2008. It is interesting to note that JM’s jewellery figures match Hong Kong imports quite closely.

Clearly it is not an exact science as to how much platinum goes to one use or another. However, jewellery manufacturing is going to be the major platinum user in China. Primarily this is because the Chinese automotive industry tends to make gasoline-powered cars, and so the split between platinum (normally found in diesel-engine autocatalysts) and palladium is heavily in favour of the cheaper metal. The next largest use typically is glass manufacturing, followed by the chemical and electronics industries.

These contribute a fair chunk to China’s consumption, but even if they have been underestimated it is still the case that jewellery demand must have increased substantially over 2008. It is possible that the high levels of jewellery demand might to some extent be masking investment in platinum, but it is impossible to know in what quantities this might be happening.

It is said from China’s Commerce Ministry on Thursday that an investigation showed U.S. and Russian exporters were dumping steel used for power generation and ordered that importers pay deposits to compensate.

As of last Friday, importers of flat-rolled electrical steel, a product used in the power industry, sold by U.S. companies will have to pay dumping margins of 10.7 percent to 25 percent, the ministry said in a statement on its Web site.

Importing the steel from Russian companies will incur similar subsidies of 4.6 percent to 25 percent, it said.

The deposits will be imposed pending final results of the investigation, which are also in retaliation for U.S. subsidies for steel companies, it said.

“The domestic steel industry has suffered substantial damage,” the ministry said, emphasizing the measures were consistent with World Trade Organization rules.

China has lashed out at similar probes of its own exporters, saying such moves are protectionism.

The U.S. Commerce Department has imposed duties of up to 99 percent on imports of Chinese-made steel pipe used in the oil and gas industry. China says the U.S. side used the wrong formula to calculate the cost of goods, and the duties it imposed were too high.

The disputes are among a series between Beijing and Washington, which also include conflicts over access to each others’ markets for tires, music and movies.

Steel analyst Michelle Applebaum said in her Steel Market Intelligence report the amount of product involved in the trade suit “is truly trivial,” because it is less than a tenth of a percent of the Chinese market. Applebaum said the case is an effort to “stem a surging tide of Western complaints about China’s high cost and subsidized steel industry’s exports.”

November steel exports from China rose to their highest level in 2009 to about 3.2 million short tons, up from about 3 million short tons a month earlier. Applebaum said these production levels have prompted steel producers to seek more export opportunities.

It is reported on December 12 that the government of the northeastern Chinese province of Hebei announced the discovery of an iron ore deposit, the Macheng deposit, with proven reserves of 1.044 billion metric tons – the largest such single iron ore deposit found in China since the 1980s.

Located in Luannan, Tangshan city, the Macheng deposit, which will be developed by Hebei Steel Group, has estimated unproven reserves of 500 million metric tons, in addition to its proven reserves.

Moreover, the Macheng deposit is situated at depths ranging from 100 meters to 600 meters, and is comparatively easy to mine. The deposit is 6 km long and 41.43 meters to 108.95 meters thick on average.

According to Lei Pingxi of the China Metallurgical Mining Enterprise Association, China is not short of iron ore resources. Based on the rapid growths in both investment and development in domestic mines, China’s iron ore output is expected to reach 1.1-1.2 billion metric tons by year 2015, Mr Lei said.

Meanwhile, he added that Chinese enterprises are making efforts to invest in overseas mines. It is estimated that by 2015 70 percent of the raw material demand of China’s steel industry will be satisfied by iron ore materials produced by domestic mines and by overseas mines held by Chinese enterprises.

After a surge in demand from China, forecasts for annual contract prices for iron ore, a $160 billion-a year-global market, were raised by Macquarie Group Ltd. and JPMorgan Chase & Co..

Australian benchmark iron ore prices may rise 30 percent, Macquarie analysts led by London-based Jim Lennon said today in a report.

That compares with their previous estimate for a 10 percent gain. JPMorgan yesterday raised its forecast increase to 20 percent from 10 percent.

Steelmakers and traders in China, the world’s biggest consumers, boosted imports 12 percent last month to meet demand from makers of cars and appliances. Iron-ore demand from U.S. and European steelmakers will also increase next year, joining China, Vale SA, the world’s largest producer, said yesterday.

“Undoubtedly, rampant Chinese growth is still the main story in the steel industry,” the Macquarie analysts said. “We remain very bullish on Chinese demand growth through 2010 and beyond, which will create tightness in the steel market during the second half of next year.”

Rio Tinto Group, the world’s second-biggest iron ore exporter, rose 0.5 percent to A$70.85 at the 4:10 p.m. Sydney time close on the Australian stock exchange. BHP Billiton Ltd., the third-biggest exporter, rose 1.1 percent. Both companies had their ratings raised yesterday by JPMorgan.

JPMorgan joins UBS AG and Goldman Sachs JBWere Pty in predicting a 20 percent gain. Vale may delay starting price talks until early next year as it seeks more market data, Chief Executive Officer Roger Agnelli told reporters yesterday.

Fractured Talks

The four-decade old annual iron ore pricing system was fractured this year after Chinese mills failed to reach agreement with the three largest suppliers. Rio Tinto last week appointed a new chief negotiator with Asian steelmakers, boosting prospects for the latest talks.

Iron ore cash sales have recently been completed at as much as a 45 percent premium to last year’s benchmark and prices may continue to rise in the coming months, Macquarie said. The bank raised its forecast to 125 cents a dry metric ton unit for Australian iron ore fines. That’s about $79 a ton compared with last year’s settlement of about $61 a ton.

China this year demanded a bigger price cut for iron ore than the 33 percent offered to Japanese and Korean mills by Rio and BHP. Baosteel Group Corp., China’s largest steelmaker, this month announced the first price gains for its products in four months as demand rebounds.

JPMorgan boosted its estimates for 2010 earnings per share, at Rio and BHP by 30 percent and 16 percent respectively on higher metals forecasts. Analysts led by David George raised their rating on BHP to “neutral” from “underweight” and Rio was raised to “overweight” from “neutral.”"We never comment on pricing discussions,” said Rio spokesman Gervase Greene. BHP spokeswoman Kelly Quirke declined to comment.