"But if the iron ore price rises, the half-year based pricing system is not good for Chinese steel mills as the contract price might go up. But it can force Chinese steel mills to enhance their efficiency, optimize their structure, and help propel overseas acquisitions," he said.

In fact, China's third-largest steel group, Wuhan Iron & Steel, agreed to invest US$186 million in South Australia's iron ore industry, Xinhua reported yesterday.

The steel mill will spend up to US$186 million to take a 60-percent stake of Adelaide-based Centrex Metals.

The joint venture will develop two iron ore mines over the next seven years.

China's steel stock has continued to fall, touching 8.96 million tons in June, down 140,000 tons from May, according to a report released by China's premier steel industry lobby.

China's steel demand was picking up steadily, driven by the recovery of the manufacturing and property sectors, the report by the China Iron and Steel Association said.

China's steel prices will rise further, pushing up the metal's price in global markets, as government public works spending spurs demand and mills charge more to cover raw material costs, Bloomberg reported.

Meanwhile, Anshan Iron and Steel Group Corporation said in a statement yesterday that none of AnSteel's employees were involved in the Rio Tinto investigation being conducted by the relevant government departments.

(China Daily July 22, 2009)