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China's largest steel firm plans to increase capacity

"Baosteel has to increase its output, mainly through mergers and alliances with other mainland companies."

Xu Lejiang, Baosteel president

China's largest steel maker plans to nearly quadruple capacity to 80 million tonnes by 2012, making it the world's second-largest producer, state press reported yesterday.

Mainly state-owned Baosteel Group Corp (寶鋼集團), which puts out about 23 million tonnes of steel a year, plans to expand in China and overseas through mergers and acquisitions, the China Daily reported, citing an internal company newsletter.

The world's fifth-largest steel group also said it hopes to boost sales to more than US$50 billion a year, with profits exceeding US$5 billion, as it seeks to climb the ranks of the world's top steel companies.

"Baosteel has to increase its output, mainly through mergers and alliances with other mainland companies," said Xu Lejiang (徐樂江), president of Baosteel said in the letter.

Chen Ying, a company board secretary, said closer cooperation with its partners was central to the plan.

"Baosteel will mainly focus on strategic cooperation, including product complementation, with prospective partners. Some other factors like scale of operations, locations and costs are also being considered," Chen told the China Daily.

At annual output of 80 million tonnes, Baosteel would become the world's second largest steel maker, overtaking the top ranked giants at the end last year, Nippon Steel Corp, POSCO and JFE Holdings.

Baosteel would still however lag ArcelorMittal, which last year produced 118 million tonnes.

Meanwhile, ArcelorMittal, the world's largest steel maker, said yesterday it would exercise its right to buy out the other owners of Canada's Wabush Mines, jilting an earlier deal they struck with Canadian miner Consolidated Thompson Iron Mines Ltd.

ArcelorMittal owns 28.6 percent of Wabush, acquired when it bought Canadian steel producer Dofasco Inc last year.

"This will bring ArcelorMittal closer to its stated objective of 75 percent iron ore self-sufficiency," said ArcelorMittal's head of mining, Malay Mukherjee.

The Luxembourg-based steel maker said it will pay around US$67 million in cash and take on certain liabilities to buy out Wabush's other owners.

They had agreed in June to sell their stakes to Thompson for US$64.3 million and 3 million shares.

But ArcelorMittal had a prior right to buy them out, which it has now exercised on similar terms as those agreed with Thompson.

ArcelorMittal is still being formed as Mittal Steel Co. NV takes over rival Arcelor SA although the two are already operating as one company that controls some 10 percent of world steel output.
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