BNP Paribas and ICBC to finance export of US$236m steel-making equipment Metal giants Minmetals and China Metallurgical Construction have finalised financing for a deal to export US$236.5 million worth of steel-making equipment to Brazil. The sale to Gerdau Group, the biggest producer of long steel products in the Americas, is the largest export of metallurgical equipment by a Chinese firm and part of a US$1.2 billion expansion of Gerdau's production capacity. 'The Chinese bid best met the project's technical, quality, commercial and financial demands,' said Claudio Gerdau Johannpeter, executive vice-president of Gerdau Group, in Beijing yesterday. Financing for the deal was provided by BNP Paribas and Industrial and Commercial Bank of China (ICBC) with insurance issued by China Export and Credit Insurance (Sinosure), the government's official export credit insurance agency. BNP Paribas and ICBC were joint lead arrangers of a US$201 million loan and BNP Paribas separately provided a direct commercial loan of US$50 million to finance the down payment of commercial contracts and cover the costs of the Sinosure insurance policy. 'An extremely important issue in our decision-making was the possibility of long-term financing in the country of origin,' according to Luiz Augusto Polacchini, chief financial officer for the Gerdau project. Yesterday's announcement marked the biggest transaction carried out by Sinosure in Latin America and its biggest syndication involving a foreign bank. State-owned mainland resources giants have been scouring the globe and investing massively in raw materials in recent years, but China-based steel analysts say this particular agreement is not so much a bid to secure supplies as a sign that Chinese technology has become globally competitive. 'For the parts we're buying, the quality of the Chinese equipment is the same as European equipment but quite a bit cheaper,' Mr Johannpeter said. 'For downstream equipment there is still some room for improvement but they will be there in a few years.' China's swelling trade surplus, which was equivalent to about 4.5 per cent of GDP last year, is mostly attributable to trade in machinery and transport equipment such as the blast furnace, coke oven and sinter plant involved in this deal. 'Just as China has acquired a comparative advantage in toys and shoes, it is now beginning to dominate in machinery exports as well, which tells me the trade surplus is here to stay,' ING's chief economist Tim Condon said. 'The frontline is Korea and Japan, but the whole world is going to be affected by the China factor.' The deal is the first foray in Latin America by the two Chinese metal and mining giants, who are actively expanding overseas with the blessing of the central government's 'go out' policy.