Anben Iron and Steel Group, China's second-largest steel producer, plans to raise its crude steel production capacity by 65 per cent in the next five years to meet surging demand for high-end products.
This is despite a target to shut 25 per cent of its capacity by 2010 to raise efficiency and cut pollution and raw material consumption.
The company, formed last year through a partial merger of Anshan Iron and Steel and Benxi Iron and Steel, aimed to raise its crude capacity to 30 million tonnes by 2010, Anshan chairman Liu Jie said.
Last year its output reached 18.4 million tonnes, of which 6.5 million came from Benxi. Anshan's capacity will rise from 15 million tonnes this year to 16 million next year.
Steel companies have been asked by the government to close down outdated facilities, particularly those churning out overabundant low-end construction steel. About 20 per cent of China's steel production is to be phased out.
Anben plans to shut 7.27 million tonnes of iron-producing capacity and 4.85 million tonnes of crude steel production capacity between last year and 2010.
The move will help meet Beijing's aim of cutting energy consumption per unit of GDP by 20 per cent, major pollutants by 10 per cent and water consumption per unit of industrial value addition by 30 per cent in the next five years.
Anben is focusing its expansion on high value-added products such as electroplated, colour-coated and silicon flat steel products used to make products such as car bodies and computer chips. Such products accounted for 66.48 per cent of its output last year.
Anshan and Benxi's restructuring has only been partially completed, with the merging of planning, research and development and marketing.
Capital merger is still awaiting talks between the central government, which controls Anshan, and the Liaoning provincial government, which controls Benxi.
Meanwhile, Mr Liu said Anshan was seeking to double its iron ore production capacity to 30 million tonnes by 2010, raising its self-sufficiency to 100 per cent from 80.
Anshan is in also talking to an Australian firm to jointly develop iron ore resources in Australia
Part of the company's capacity expansion to 30 million tonnes is a five-million-tonne-a-year project that will produce steel for shipbuilding. The project is awaiting government approval.