Shougang Concord to double steel cord production capacity

PUBLISHED : Friday, 11 January, 2008, 12:00am
UPDATED : Friday, 11 January, 2008, 12:00am

Shougang Concord Century Holdings, in which the world's largest steel cord maker Bekaert has a stake, plans to invest 500 million yuan to double its steel cord production capacity to meet rising demand from the country's motor industry.

Annual production capacity of steel cord for tyre reinforcement at the red-chip company's Zhejiang plant would increase to 60,000 tonnes by mid-year from 30,000 tonnes, managing director Li Shaofeng said yesterday after the company's shareholder meeting.

Shareholders yesterday approved a plan to issue 400 million new shares to the company's largest shareholder Shougang Concord International Enterprises, at HK$1.03 each.

Along with 200 million new shares issued to the Li Ka-shing Foundation, Keywise Greater China Opportunities Master and funds managed by Value Partners at HK$1.03 each last month, Shougang Century could raise a total of HK$618 million.

Mr Li said proceeds from the share sale would be used mainly for capacity expansion and acquisitions, if opportunities arose.

Domestic demand for steel cord is expected to grow 10 to 15 per cent a year to one million tonnes by 2010, said Shougang Concord executive director Cornor Tang Kwok-kau.

Bekaert, which will hold 11.7 per cent of the company after the placement, would also help it expand into overseas markets such as the United States and Europe, Mr Tang said.

The company aimed to increase export sales to 15 to 20 per cent of total output from 11 to 15 per cent, over the next two years, he added.

Some 10 million vehicles are expected to be sold on the mainland this year, up from about 8.7 million units last year and 7.22 million in 2006, according to the China Association of Automobile Manufacturers.

Profit contribution from the steel plate business to Shougang Concord International more than doubled last year as output grew amid rising prices, said Shougang Concord International deputy managing director Michael Chen Zhouping. 'Our steel plate output doubled to 1.93 million tonnes last year and profit growth will be even higher,' Mr Chen said.

Output was expected to increase to 2.2 million tonnes this year and 2.5 million tonnes next year, he added.

'Demand for steel plate, especially from shipbuilders in China, Korea and Japan, is very strong. Our first-quarter orders were fully booked and our selling price was on average 30 per higher than the second-half of last year,' said Shougang Concord International managing director Cao Zhong.