Ziscosteel, Chinese investors and Zimbabwe’s poor record for negotiating investment deals

Back in China, the country is actually shutting down steel plants because there is too much capacity.

In other words, China, the world’s largest producer and consumer of steel, has more steel than it knows what to do with.

It can produce better quality steel, at lower cost.

Why then would a Chinese firm go abroad to make more expensive steel?

What China is hungry for is iron ore.

Large producers, such as Rio Tinto and BHP Billiton in Australia, are spending up to $10 billion to ramp up production and meet demand for ore in China, which imported a billion tonnes in 2016.

Just this week, iron ore prices were touching four-month highs.

With new regulation against pollution, China is hungry not just for iron ore, but good quality ore.

According to the Chamber of Mines, Zimbabwean ore has content of “40 percent and above”.

An expert said that ore quality in Zimbabwe is as high as over 60 percent at Buchwa, which supplies Zisco.

This week, ore with content of 62 percent was selling for close to $80 a metric tonne in China, a five-month high.

Much of the ore sold on world markets is below 40 percent, the industry expert said.

By some estimates, Zimbabwe has vast ore reserves to last a thousand years of production.

The Chinese would have done their homework, and will be eyeing the ore more than the rust bucket that is the Zisco plant.

This was the source of the conflict with Essar Africa that led to the collapse of the deal.

The government seemed not to know what it had signed for; had it sold just the plant or its vast ore assets?

At one point, the government agreed to cede 80 percent of the ore rights to Essar.

This made Essar happy, but only until some within the government belatedly realised just how much they had given away.

The deal was reversed, and Essar walked away, telling the government to get itself in order.

“The investor had to take a break and say, ‘when you are ready, we will come back’,” Bimha said then.

Essar never did come back.

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