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China to ban foreign cos from
owning steel firms
BEIJING
- China, the world's No 1 steel manufacturer and
consumer, is expected to change the rules
governing foreign investment in its fast-growing
steel sector. The nation will forbid foreign steel
producers from taking controlling stakes in
domestic steel companies, Qi Xiangdong, deputy
secretary general of China Iron and Steel
Association, said recently.
Foreign steel
producers, if they want to invest in China's steel
sector, must "have independent intellectual
property in steel-making technologies and have an
annual output of 10 million tons," Qi told China
Daily. These restrictions will be included in a
national steel industry policy, which is to be
released next week, he said. The change comes as
foreign steel giants are speeding up mergers and
acquisitions (M&As) in China's steel industry,
and even seeking majority stakes in domestic steel
mills.
Mittal, the world's biggest steel
group, will buy a 36.67% stake in Valin Iron and
Steel Co Ltd - a Shanghai-listed steel maker in
Central China's Hunan Province, the Chinese
company said last month. The figure will be less
than it previously intended. In January, Mittal
and Valin's State-owned parent agreed to each
having a 37.17% stake in the Shanghai-listed firm.
Arcelor, the world's No 2 steel company, has also
been seeking a controlling stake in Laiwu Iron and
Steel Co Ltd - a Shanghai-listed steel maker in
East China's Shandong Province. Both Valin and
Laiwu are among China's top 20 steel makers.
Analysts said the expected steel policy
indicates that the Chinese Government is unwilling
to see foreign steel giants control the steel
sector. "The steel sector is one of the backbones
of China's steadily-growing economy. Therefore, it
should not be controlled by foreigners," said Tian
Shuhua from China Galaxy Securities Co Ltd.
However, Tian said foreign steel giants still have
many opportunities because China's steel sector
and market will continue to grow rapidly, although
they will be banned from having majority stakes in
domestic steel mills. "Foreign steel giants could
also accelerate technical collaborations with
Chinese partners," he added.
China
produced 272.8 million tons of steel last year, up
by 22.7% from 2003. The steel association
predicted earlier that the nation's steel output
will reach 300 million tons this year. Qi said the
expected steel policy will boost associations
between Chinese steel makers in different regions
through cross-shareholding and other measures to
form bigger groups that will improve the
fragmented sector's competitiveness. Zhou Xizeng,
from CITIC Securities Co Ltd, said, "The new steel
policy also indicates that the government hopes to
put China's steel sector in order, instead of
letting foreign giants do it." There were 871
steel producers in China by the end of last year,
of which only 15 had an annual crude steel output
of more than 5 million tons.
Shanghai
Baoshan Iron and Steel Corp, China's biggest steel
maker, only ranked No 6 in the world. The company
now has an annual steel production capacity of
more than 20 million tons, compared with Mittal's
58 million tons and Arcelor's 46 million tons. Luo
Bingsheng, another top official from the steel
association, last month suggested that Chinese
steel companies should form four to five bigger
groups with an annual steel output of more than 30
million tons through M&As within the next two
to three years. Anshan Iron and Steel Corp and
Benxi Iron and Steel Corp, another two Chinese
steel heavyweights in Liaoning Province, are
expected to merge to form a new group this month
or later, said sources from the two companies. It
should have a production capacity of more than 20
million tons.
China imported 13.2 million
tons of steel products in the first half of this
year, up 26.8% from a year ago, according to Qi.
Meanwhile, the nation's steel exports surged by
154% to 11.6 million tons. China imported 133
million tons of iron ore in the period, up 34.3%.
(Asia Pulse/XIC) |
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