Maanshan Iron plans to move capacity home

PUBLISHED : Thursday, 19 April, 2007, 12:00am
UPDATED : Thursday, 19 April, 2007, 12:00am

Maanshan Iron & Steel, the mainland's second-biggest Hong Kong-listed steelmaker, said it planned to move to its home base the iron and steel-making capacity of a 71 per cent-owned unit, at a possible investment of 19 billion yuan.

The relocation of three million tonnes of annual capacity to Maanshan city, Anhui, from nearby Hefei, will shift the highly polluting industry from the provincial capital, and better concentrate production in areas where there is demand, said chairman Gu Jianguo.

Mr Gu said Hefei would be developed into a downstream steel processing base focused on producing high-value added products, such as cold-rolled and galvanised sheets.

Annual capacity has been targeted at 1.7 million to 1.8 million tonnes, some of which may feed the city's electrical appliances manufacturers and carmakers.

The move is expected to begin in the second half of next year at the earliest, since it still needs the approval of the National Development and Reform Commission, according to Mr Gu.

Maanshan Steel bought the majority stake in the unit, Magang (Hefei) Iron & Steel, formerly Hefei Iron & Steel, for 355 million yuan in May last year.

The steel processing base in Hefei will need an investment of about five billion yuan while the move will require about 15 billion yuan.

Mr Gu said the moving costs would not be a financial burden on the company because capital spending for this year would be about 8.5 billion yuan, only half of last year's 16.1 billion yuan.

He also said that the building of a five million tonne-capacity factory in Maanshan for thin plate steel would be completed and operational in June.

'We have passed the peak of investment,' Mr Gu said.

Maanshan Steel, which will have annual production capacity of 16 million tonnes of crude steel once the new plant begins production, aims to produce 33 per cent more crude steel this year to 14.52 million tonnes and 31 per cent more steel products to 13.44 million tonnes.

Jeannette Sim, an analyst at ABN Amro, expects Maanshan Steel's earnings to show a significant improvement this year, helped by a rebound in steel prices and increased production volume.

On Tuesday, the company posted an 18 per cent decline in net profit to 2.39 billion yuan for last year.

Shares in Maanshan Steel fell 1.13 per cent, closing at HK$5.24 yesterday, but are up 22.72 per cent for the year.

Heavy lifting

Maanshan Iron will move three million tonnes of capacity from Hefei to Maanshan city

Investment required for the project in yuan: 15b