Angang aims to reap US$250m in HK spin-off

PUBLISHED : Thursday, 15 May, 1997, 12:00am
UPDATED : Thursday, 15 May, 1997, 12:00am

China's largest steel complex, Anshan Iron and Steel (Angang), hopes to raise up to US$250 million by spinning off its downstream manufacturing operations in Hong Kong in July.

Angang New Steel, formerly called Angang Sanxin, will comprise three of the group's profitable offshoots that make cold rolled sheet for cars and electrical appliances, fast-speed wire rods for construction and thick plates for shipbuilding.

Plunging steel prices and soaring production costs have hampered the planned Hong Kong flotation of Wuhan Iron and Steel.

Angang hopes to alleviate market concern over China's steel sector by separating the profitable downstream operations from upstream operations, which are generally pig iron and steel smelting.

The smelting operations will remain under the control of the parent company.

The decision to split the operations also means the H-share company will differ fundamentally from rival Maanshan Iron & Steel Co, the only listed mainland steel plant in Hong Kong, which is an integrated producer.

Angang New Steel will employ 4,000, compared with a group workforce of 160,000.

It is understood the company has an agreement with the parent which will supply it with pig iron and steel at discounts to market prices.

'The company will gradually move upstream after the flotation,' a source said.

He said the listed arm's long-term plan was to acquire the upstream manufacturing facilities from its parent.

Angang New Steel has earmarked the listing proceeds to build a converter furnace that uses new technology to smelt steel.

On completion of the project, the company will be self-sufficient in steel supplies but will continue to source pig iron from its parent.

The source said Angang New Steel, among China's fourth batch of enterprises scheduled for overseas listing, would raise between $200 million and $250 million.

Analysts representing the flotation's underwriters visited the plant in Anshan, Liaoning province, this week.

The flotation, sponsored by ING Barings, is seen as part of China's state-owned enterprises reform, which aims to reactivate the moribund state sector through the capital market.