SHANGHAI, Feb. 22 -- A unit of China's Baosteel Group has signed an agreement with Indonesian Modern Group to jointly develop nickel laterite deposits in southeast Sulawesi, China's State-Owned Assets Supervision and Administration Commission said Monday.

The deal is part of Baosteel's efforts to secure raw material supplies in overseas markets on the back of strong demand for commodities and scarce resources in the domestic market.

The project will aim to explore potential high-grade laterite resources, a cheap-but-efficient substitute for nickel, a key ingredient in stainless steelmaking, in the southeast Sulawesi region, Sasac said.

The wholly owned unit of China's second-largest steelmaker, Baosteel Resources (Indonesia) Co., was set up last month. The two companies have had a partnership in nickel laterite exploration since April 2007, it said.