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.
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.
(China Daily August 8, 2007)
