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PRC steelmakers invest in new venture

Major Chinese steelmaker Wuhan Iron Steel Group (武漢鋼鐵集團) has joined with smaller partner Liuzhou Iron & Steel Group (柳州鋼鐵集團) to set up a venture with an eventual annual capacity of 27.2 million tonnes, the companies and reports said yesterday.

The project gives Wuhan Iron & Steel, also known as Wisco, an 80 percent stake in the joint venture through a cash investment, while Liuzhou Iron & Steel, or Liugang, will contribute all its net assets, Liugang said in a statement to the Shanghai Stock Exchange.

The owner of Liugang, the regional state assets administration in Guangxi, in southwestern China, will hold a 20 percent stake in the venture, to be called the Guangxi Iron & Steel Group (廣西鋼鐵集團), it said.

The project is part of a gradual process of consolidation in China’s steelmaking industry. Wisco, now the nation’s fourth-biggest steel producer by output, will rival the country’s biggest three makers.

The 205 billion yuan (US$30 billion) project, to be located in the Guangxi port of Fangchengang, is expected to begin operations in just under four years, with an initial annual capacity of 9.1 million tonnes, the official Xinhua news agency and other reports said.

The two companies will shut 8.3 million tonnes of obsolete steelmaking capacity and 4.9 million tonnes of ironmaking capacity, the reports said.

Shanghai-traded Liugang gained 6.7 percent to 4.29 yuan (US$0.63) by midday yesterday, while Wuhan Steel Co edged 0.1 percent higher to 7.10 yuan.

China is the world’s biggest maker and consumer of steel.

In June, two other major Chinese steel companies, Tangshan Iron Steel Group (唐山鋼鐵集團) and Handan Iron & Steel Group (邯鄲鋼鐵集團), merged to form a new state-owned company called Hebei Iron & Steel (河北鋼鐵), with an expected annual production capacity of nearly 29 million tonnes.

That venture displaced Shanghai-based Baosteel Group C (寶鋼集團), whose annual output last year was 25.9 million tonnes, as China’s biggest steelmaker and the world’s fifth-largest.

But Chinese steelmakers have been cutting back some production as demand slows in light of a deceleration in global demand.
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