Fosun says its annual output may catch Baosteel's

By Jin Jing (China Daily)
Updated: 2007-08-08 09:24

Fosun, one of China's largest privately owned firms, said the combined annual crude steel output of its local holdings will hit over 20 million tons by the end of this year - close to that of the country's largest steelmaker, Baosteel.

"The combined crude steel production of all our holding companies is likely to approach that of Baosteel," said Chen Guoping, assistant general manager of Fosun Group, which listed on the Hong Kong stock exchange in July.

"We're trying to quicken the pace of the Hainan Steel restructure, which is likely to happen soon."

Fosun and Hainan Steel are in the process of setting up a new Hainan mining company. Fosun will pay 900 million yuan for a 60 percent stake in the new firm. The two parties signed a framework to restructure Hainan Steel in June. Fosun will invest around 2 billion yuan in Hainan's mining business.

Related readings:
 Fosun IPO nets $1.48 billion
 Fosun plans $1.4b IPO, draws Li Ka-shing
 Steel industry: No govt subsidies
 NDRC: China no steel mill for the world

Hainan Steel, one of China's largest iron ore producers, posted a profit of 400 million yuan in 2006.

After buying a 30 percent stake in Jianlong Steel Group and becoming the majority shareholder of Nangjing Steel United Co Ltd and Hainan Steel, Fosun is now in merger talks with Hangzhou Steel, Qingdao Steel and Nanchang Steel.

"As an increasing number of State-owned steel companies consolidate, private steel magnates are also on the look-out for mergers and acquisitions," said Liu Baoyang, an analyst at Guangfa Securities.

Fosun Group and Shagang Group, the two private steel producers in China, have already signed a strategic cooperation agreement to tackle the increasingly competitive global steel market by forming alliances and restructuring.

"Private steel producers like Fosun have flexible management systems and sound profit growth - unlike State-owned companies," said Liu Yanqi, an analyst at Haitong Securities.

"Private steel producers are strong in terms of capital, but lack techniques and resources compared with State-owned firms, which can easily get government capital and technical support," said Liu at Guangfa Securities.


(For more biz stories, please visit Industry Updates)