Shougang eyes Changzhi Steel upgrade

PUBLISHED : Tuesday, 11 August, 2009, 12:00am
UPDATED : Tuesday, 11 August, 2009, 12:00am

Shougang Group, one of the mainland's top 10 steelmakers, plans to invest 19 billion yuan (HK$21.55 billion) to expand production capacity at a newly acquired steel mill in Shanxi province.

Beijing-based Shougang has agreed to pay 500 million yuan for a 90 per cent stake in Changzhi Iron & Steel (Group) under an agreement it signed with the Changzhi municipal government on Saturday.

The local government will retain a 10 per cent stake in the steel mill, according to a statement posted on the website of Changzhi Steel.

Shougang would spend 19 billion yuan in the next three years to more than double Changzhi Steel's annual capacity to six million tonnes and improve its product mix, the firm said.

The co-operation between the two mills is the second cross-province merger and acquisition deal since the State Council unveiled a revitalisation plan for the industry early this year. Shanghai's Baosteel Group bought a 56.15 per cent stake in Zhejiang's Ningbo Iron & Steel in March for 2.02 billion yuan.

Analysts expect Shougang to also buy coal and iron mines in Shanxi to optimise its local industrial chain.

Mainland newspaper reports said Shougang would control a coal mine in Qinyuan county, Changzhi city, which has 200 million tonnes of coal reserves, by buying the smaller rival.

Shougang and Hong Kong-listed arm Shougang Concord International Enterprises own 21.79 per cent of Fushan International Energy Group, which has coal mines in Shanxi.

Meanwhile, Shougang, through its 51 per cent-owned Shougang Jingtang United Iron & Steel, plans to set up a coking coal plant with Shanxi Xishan Coal and Electricity Power in Caofeidian, Hebei province.

The coking coal plant, of which Shougang will own 50 per cent, would have a registered capital of 2 billion yuan, Xishan Coal said in a filing with the Shenzhen Stock Exchange. It would have an annual capacity of 4.2 million tonnes by year-end and was expected to generate annual revenue of 7.6 billion yuan.

Ramping up

Amount Shougang will invest to expand capacity at Changzhi Steel, in yuan: 19b yuan