Shougang Group, China's fifth-biggest steel mill, plans to join forces with Brazilian iron ore provider CVRD to ship ore to its new North China base.

The two parties have held preliminary talks on forming a joint venture to ship iron ore from Brazil to Shougang's new plant, which is being constructed in Caofeidian in Bohai Bay, Chen Hanyu, an official from the Beijing-based company, told China Daily.

Shougang is also considering building an iron ore pelletizing plant with CVRD in Caofeidian, Hebei Province, to supply the new plant, Chen said.

The new plant will be completed in 2008. It will have an annual production capacity of 8 million tons, but could be expanded to 20 million tons a year in the future.

Chen would not reveal how much Shougang could spend on the possible partnership with CVRD.

"The move is designed to cut freight costs to offset mounting iron ore prices and secure a stable supply," he said.

He said the joint venture's planned iron ore fleet would consist of vessels with a loading capacity of at least 300,000 tons each, up from the less than 200,000 tons of ships Shougang currently uses, which will help the company slash freight costs by almost half.

All the ore needed for the new Caofeidian plant, which will include a deepwater wharf, will come from abroad, mainly from Australia and Brazil, he added.

Liu Shuiyang, vice-president of Shougang, last month said the company would import 15 million tons of iron ore this year, up from an estimated 12.5 million tons last year.

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