Arcelor Mittal Bid to Buy Laiwu Nixed

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China has reportedly rejected the proposed purchase of Laiwu Steel Corp by international steel giant Arcelor Mittal.

The National Development and Reform Commission (NDRC) has rejected the deal, said China Business Journal, citing unnamed sources.

The report said two objections were put forward by the NDRC, concerning price and technology transfer.

Arcelor Mittal agreed to buy a 38 percent stake in Laiwu Steel for 2 billion yuan in February 2006. Last year, Mittal and Arcelor merged to become the world's largest steelmaker.

China's steel industry regulations stipulate that overseas companies cannot take a controlling stake in a joint venture. Talks between Baotou Iron and Steel Group and Arcelor Mittal on selling the former's stake had earlier ended in a stalemate.

Overseas investors have showed increasing interest in China's steel industry. Arcelor Mittal has already paid US$338 million for a 36.67 percent stake in Hunan Valin Steel Tube & Wire Company Ltd.

Industry insiders believe China's steel industry will be marked by consolidation in the next few years, with steel production concentrated in the hands of larger companies.

Shanghai Baosteel Group Corp, the country's largest steelmaker, has purchased smaller rival Bayi in Northwest China, which is its first domestic acquisition.

The deal is expected to beef up Baosteel's presence in Northwest China as Bayi commands about 70 percent of the market share in Xinjiang, said a Baosteel statement.

Two of the top 10 Chinese steel manufacturers, Anshan Steel and Benxi Steel, both in Liaoning Province, plan to team up to form Anben Steel Group, with an estimated annual production capacity of 20 million tons.

The Chinese steel industry is also concentrating on the technological upgrading of the existing plants. The authorities have approved the construction of the 67.7-billion-yuan Jingtang Iron and Steel Project in North China's Hebei Province.

Beijing-based steel giant Shougang is relocating to Hebei Province, where it will launch the project with Tangshan Iron and Steel Group. The new project, located at Caofeidian deep-water harbor, is projected to produce 8.98 million tons of iron and 9.7 million tons of steel a year. It will also make 9.13 million tons of steel products, the NDRC said.

The iron and steel investment frenzy showed signs of abatting in 2006 as macro regulations began to tame five straight years of 20 percent growth.

Figures from the National Bureau of Statistics showed the total investment in the sector amounted to 224.65 billion yuan, down 2.5 percent year-on-year.

(China Daily March 13, 2007)

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