Hebei province-based Jinxi Iron and Steel plans to list on Hong Kong's main board as a red chip next month to raise US$200 million to $300 million to expand capacity, sources say. The company has received provisional approval from Hong Kong Exchanges and Clearing to list and has appointed Merrill Lynch and JP Morgan to sponsor its listing. The company was a state-owned enterprise until management bought a controlling stake in 1999. It focuses on construction steel which is in high demand because of China's construction boom, driven by investment in new apartments, factories and public infrastructure. Jinxi booked total turnover of about 2.6 billion yuan in 2002 with net profit of about 420 million yuan, the sources said, adding it had become one of the lowest-cost domestic producers after privatisation. The company has an annual capacity to produce more than three million tonnes of steel. H share Maanshan Iron & Steel, the country's sixth-largest steel producer, also focuses on the construction sector. It produced 5.38 million tonnes of steel in 2002. Steel prices have risen 15 per cent to 20 per cent in the past year, and have gone up further early this year. Analysts expect more expensive iron ore - the main raw material for steel production - to result in further price rises. Japan's largest steel maker, Nippon Steel, this week accepted an 18.6 per cent rise in iron ore prices from Australian suppliers, the highest jump in more than 20 years. China's largest steel maker Shanghai Baosteel Group also agreed to the same increase on ore from Brazil's Companhia Vale do Rio Doce. The central government has been trying to cool over-investment in the steel sector, particularly in low-end segments crowded with many small producers. Higher profits had driven companies to expand capacity substantially. China is the world's largest steel producer, consumer and importer. It consumed 218 million tonnes in 2002, or 25.8 per cent of the world's total. Higher costs of iron ore, coal and transport will continue to hit mainland steel mills this year.