The iron ore market is dominated by several big producers with whom steel mills tend to enter into long term supply contracts, leaving little room for spot trading. As a trader purchasing steel from mills, it makes good business sense for Stemcor to supply these mills with raw materials for making steel and to lock into mutually beneficial contracts. In order to be able to purchase raw materials and secure a trade flow, it is often necessary to have a shareholding in or a financial arrangement with a raw materials producer.
Stemcor has therefore developed a strategy of investing in mining and related assets. This direct participation in mining resources secures access to iron ore feed for our steel producing partners.
In 2007 we substantially reduced our stake in the Savage River iron ore mine and pellet plant in Tasmania to a residual 10% holding and the proceeds of that divestment were in part invested in new mining and related developments in India. Savage River has since been vended into Grange Resources, a company listed on the ASX, but Stemcor retains the royalty structure based on a function of pellet production and benchmark pricing from 2011 through to 2023.
Stemcor now holds two key assets in India, Aryan Mining & Trading Corporation and Brahmani River Pellets Ltd, both based in the state of Orissa.