China steel maker buys control of rival
(iht.com)
Updated: 2005-12-21 22:06

Wuhan Iron & Steel Group, China's third-biggest steel maker, said it has agreed to buy 51 percent of Liuzhou Iron & Steel Group, a state-owned company, raising its steel production capacity by one-third.

Wuhan Steel and Liuzhou Steel signed the 6.5 billion yuan, or $805 million, agreement Monday, Zhao Hao, a spokesman at Wuhan Iron & Steel, said. Wuhan Iron & Steel is the Shanghai-listed unit of Wuhan Steel Group.

The government will hold the remaining 49 percent stake in a joint venture, which will control Liuzhou's mills and plants, Zhao said.

China, which produces a third of the world's steel, wants to consolidate its 264 steel makers to help reduce excess production capacity. Getting bigger will also help Chinese companies to compete with global rivals like Mittal Steel, and to invest in making high-quality products for cars, ships and home appliances.

"The move enables Wuhan Steel to access a bigger market in exchange for taking over less profitable rivals to help ease a domestic glut," said Lin Hai, a steel analyst at Guotai Asset Management in Shanghai.

The acquisition will increase Wuhan Steel Group's annual production capacity to 20 million metric tons of steel, from about 15 million tons, said Zhao. The company, based in the central province of Hubei, will remain China's No. 3 producer after Baosteel Group and Anben Iron & Steel Group.