By Gong Zhengzheng (China Daily)
Updated: 2008-03-11 10:02

Wuhan Iron & Steel Group (Wugang), China's fourth biggest steelmaker, vows to grow its profits by seven percent this year, despite rocketing prices of overseas iron ore.

Deng Qilin, president of the State-owned company based in Hubei province, said it expects to reap 10 billion yuan ($1.41 billion) in profits this year, up from 9.3 billion yuan in 2007.

"We are determined to achieve the target, although we are facing a big challenge from price hikes of (imported) iron ore," Deng said.

Last month, Baosteel Group, China's top steel producer, which represented the domestic steel industry at the talks, agreed to a 65 percent rise in iron ore price till March 2009 with CVRD, the world's largest provider of the main raw material for steel. This is the fourth consecutive increase since 2005.

Deng said his company will speed up development of an iron ore project with a total proven reserve of 1.6 billion tons in western Hubei this year.

Wugang is also in talks with foreign partners to join iron ore development in many countries, such as Cambodia and Australia, he said.

A deputy of the ongoing National People's Congress, Deng suggested the State should act to boost Chinese steel producers' say in the international iron ore market and further support them to explore the material at home and abroad.

"Price hikes of imported iron ore will inevitably result in price rises of steel products, which will push up prices of other commodities," he said. "This will bring about risks in our economy."

Average prices of main steel products in China jumped 25.6 percent in February from a year ago, according to industry data.

China's iron ore imports climbed to a record 38.2 million tons last month, 4 percent more than the previous peak in January.

The country is under mounting inflationary pressure, with its January consumer price index surging by 7.1 percent year-on-year.

Deng said Wugang plans to raise its crude steel production to 22 million tons this year from 17 million tons last year. It expects its sales revenue to exceed 100 billion yuan, up from 80.2 billion yuan.