China Steel wants to boost output

China Steel Corp (中鋼), the nation's biggest steelmaker, said it will hold talks with Japan's five largest steelmakers about investing in a new ?700 billion (US$5.6 billion) mill to double its capacity.

China Steel said Chairman Kuo Yen-tu (郭炎土) and other executives will visit NKK Corp, Kawasaki Steel Corp, Nippon Steel Corp, Sumitomo Metal Industries Ltd and Kobe Steel Ltd after July 20.

China Steel's new mill would boost its capacity to more than 20 million metric tons a year, from output of 10.3 million tons last year.

"We are nearing full capacity now and have no more space to add on new lines," said Wang Mao-ping (王茂賓), general manager in the public affairs department at China Steel. "It's way too early to say which companies China Steel will likely work with."

Increased steel output from Taiwan would likely increase competition in Asian markets as the region's mills seek alternative outlets to the US, which has targeted companies such as Nippon Steel for anti-dumping tariffs and is studying possible import curbs.

China Steel also aims to discuss alliances in technology and processing and to cut costs by linking up in purchases of coal, iron ore and other raw materials, said China Steel's Wang.

The world's top steelmakers have entered alliances and mergers to cut costs as slowing economies and high inventories cut prices and earnings.

Alliances and mergers among their largest customers such as carmakers, and suppliers such as coal and iron ore miners, have spurred steelmakers to seek greater bargaining power by linking up.

China Steel's new mill, which is likely to have four blast furnaces, would be built in one of two possible locations, Wang said.

One is in Pinan Industrial Complex in Tainan county, though it's likely to be opposed by environmentalists. Another is in Taichung port.

Without building a new mill, China Steel has limited flexibility to expand.

"Our production last year was 10.3 million tons and we aim to increase that by 10 percent to 11 billion tons," said Wang, though he wouldn't say when. "It won't be this year as the economy is not good."

Kawasaki Steel will merge with rival NKK next year. Nippon Steel signed a strategic alliance with South Korean rival Pohang Iron & Steel Corp last year.

Nippon Steel and Kawasaki officials said they can't confirm the proposed visit by China Steel. NKK spokesman Kenichiro Imai said the Taiwanese steelmaker hasn't asked the Japanese steelmaker for financial support.