Berkshire Hathaway

Guangnan and Posco in US$60m joint venture

PUBLISHED : Wednesday, 10 January, 2007, 12:00am
UPDATED : Wednesday, 10 January, 2007, 12:00am

Guangnan (Holdings), China's third-largest tinplate maker by production capacity, yesterday said it would set up a US$60 million tinplate joint venture with South Korean steel giant Posco to more than double its output capacity.

Located at Qinhuangdao, Heibei province, the venture would be 66 per cent owned by Guangnan and 34 per cent by Posco, the red-chip company said in a statement to the Hong Kong stock exchange.

Kim Eng Securities said the venture would help Guangnan improve expertise in tinplate production and offer it a stable supply of black plate, an intermediate ingredient for making tinplate.

Shares in Guangnan shot up 11.85 per cent to close at HK$1.51 after they resumed trading yesterday on the news of the venture.

Total investment in the joint venture would be US$60 million, including US$30 million registered capital, with the balance to be funded by bank borrowings or shareholder's loans, the statement said.

'The joint venture ... will provide a valuable opportunity for the group to expand its business and the group would also benefit from its investment ... through securing adequate supply of black plates and advancing its tinplate production technology,' Guangnan's chairman Liang Jiang said in the statement.

The joint venture, which has an annual production capacity of 250,000 tonnes of tinplate, will buy production facilities from Posco for up to 16.7 billion won (HK$141 million). The plant is to start production next year.

Posco supplied US$78.5 million worth of black plate to Guangnan's tinplate plant in Zhongshan, Guangdong province. It is expected Posco will supply up to US$265.5 million worth of black plate in 2008 after their joint venture started operations which will be further lifted to US$317.8 million in 2009.

Guangnan is also building a new black-plate factory with annual capacity of 150,000 tonnes in Zhongshan, which is expected to begin production this year. Its Zhongshan tinplate plant has an annual production capacity of 200,000 tonnes at present.