China Steel Corp (中鋼), the nation’s biggest steelmaker, has decided to take a 70 percent stake in a Chinese steel plant and a 5 percent stake in Formosa Plastics Group’s (FPG, 台塑集團) Vietnam steel venture as part of its long-term investment plans.
The Kaohsiung-based company said on Thursday its board had approved the investment plans, which will cost the company US$30.52 million to buy the majority stake in Changzhou Xinzhong Precision Alloy Forging Products Co (常州新眾精密合金鍛材) in China’s Jiangsu Province and US$135 million for the investment in Vietnam, its stock exchange filings said.
The investment, which would be the Taiwanese steel mill’s first investment in China, allows the firm to branch into specialty steel sectors, such as forging steel and alloy steel, the filings showed.
The Changzhou plant is an overseas investment of Taiwan’s Walsin Lihwa Corp (華新麗華), which bought the plant for about US$39.4 million in 2006 — when it was called Changzhou Wujin NSL Co (常州武進大眾鋼鐵) — from NSL China Investments Ptd Ltd.
The sale of the 70 percent stake in the Changzhou plant to China Steel is now awaiting approval from Walsin Lihwa’s board.
China Steel’s 5 percent stake investment in FPG’s steel mill in Vietnam, Formosa Ha Tinh Steel Corp (台塑河靜鋼鐵興業), was lower than the 10 percent stake which the industry expected.
The Vietnamese investment is expected to give China Steel access to supplies of raw materials, such as semi-finished steel from the Formosa plant with lower transportation costs and market risks, the company’s filing said.
China Steel has a cold-rolled steel mill in Vietnam, China Steel Sumikin Vietnam Joint Stock Company, which is a joint venture with Japan’s Sumitomo Metal Industries Ltd established last year. FPG announced in July last year it intended to purchase a 5 percent stake in that venture.
China Steel posted a net income of NT$23.82 billion (US$743 million) in the first half of the year, or NT$1.86 a share, compared with a loss of NT$6.45 billion a year earlier. In the second quarter, the company saw net income increase to NT$12.8 billion from NT$725 million a year earlier.
On Thursday, the company’s board also approved domestic investment plans, including spending NT$1.52 billion to revamp a coke oven plant, NT$1.99 billion in a casting plant, and the purchase of up to NT$800 million of shares in China Steel Structure Co (中國鋼鐵結構) through a private placement, the company’s filings showed.
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