Shougang Corp, China's No 9 steelmaker by 2006 production, will inject the assets of its new, planned plant into a Shenzhen-listed arm, to enable it to list in its entirety.

 

Zhu Jimin, the group's chairman, told China Daily that it will put the new plant, to be located in a small northern Chinese island, into Shenzhen-listed Beijing Shougang Co Ltd "when construction reaches a certain stage".

 

However, Zhu did not provide a specific timeframe.

 

The parent Shougang and Tangshan Iron & Steel Corp, the nation's third-biggest steel mill, will start building the new plant this month in Caofeidian, Bohai Bay, with a total investment of 66.8 billion yuan.

 

Shougang will hold a 51 percent stake in the plant, which is to be completed by 2010, with an annual production capacity of 9.7 million tons. The plant will make car and home appliance plates and other high valued-added products.

 

The expected asset injection is expected to enable Shougang to raise money to expand in a country that has been the world's top steel producer for a decade.

 

"The move will help Shougang strengthen its profit-making ability considerably as the new plant will be its best asset," said Zhou Xizeng, an analyst with CITIC Securities Co Ltd in Beijing.

 

A number of big State-owned steel mills have listed in their entirety in recent years, such as Baoshan Iron & Steel Corp (Baosteel), Wuhan Iron & Steel Corp and Anshan Iron & Steel Corp.

 

Shougang's Zhu said the company will merge smaller steel firms in China as part of efforts to double its annual production to 20 million tons by 2010.

 

But he also declined to reveal its merger targets.

 

Shougang now has a combined production capacity of 13 million tons a year in Beijing its current home base and neighboring Hebei Province. Last year, it produced 10.5 million tons of crude steel, reaping almost 2.7 billion yuan in profit.

 

The company plans to halt all steel production in Beijing, host of the 2008 Olympics, by 2010 to alleviate pollution, in line with central government orders.

 

Beijing Shougang Co Ltd, which went public in 1999, now accounts for a small part of the parent Shougang in terms of production, assets and profits.

 

The company, 73.2 percent owned by the parent, made less than 4 million tons of crude steel last year, it said. Its total assets stood at 16.2 billion yuan by the end of 2006, compared with the parent's more than 100 billion yuan.

 

In the first three quarters of last year, the listed firm reported 447.8 million yuan in net profit.

 

It ended at 4.57 yuan per share yesterday, up 1.11 percent.

 

While China's steel sector has seen some mergers and acquisitions (M&As) in recent years, industry officials and analysts said the pace was too slow, as it remains highly fragmented with over 800 players.

 

Last month, Baosteel based in Shanghai spent 3 billion yuan to buy a 69.6 percent stake of Bayi Iron & Steel Group, a smaller steel mill in Northwest China.

 

Luo Bingsheng, vice-chairman of the China Iron & Steel Association, said earlier that domestic steel companies should speed up M&As to become more competitive for fear of being bought by foreign steel giants.

 

In 2005, the world's top steel producer Mittal acquired a 36.7 percent stake in Valin Steel Tube & Wire Co Ltd, a Shenzhen-listed steelmaker.

 

Arcelor, the European steelmaker taken over by Mittal last year, is awaiting approval from Chinese regulators to buy a 38.4 percent stake in Laiwu Iron & Steel Co Ltd listed in Shanghai.

 

Crude steel production in China hit a record high of 418.8 million tons last year, climbing 18.5 percent from 2005, according to data from the steel association.

 

(China Daily February 13, 2007)