Bloomberg News

Anshan Scraps Plan for Indian Steel Plant, Continues U.S. Talks

March 29, 2012

Anshan Iron & Steel Group (ANSHZ), China’s second-largest steelmaker, scrapped a plan to build its first factory in India because of “risk” concerns and is continuing with talks for a planned plant in the U.S.

“We see some risks after careful study of the project” in India, Chen Ming, vice chairman of listed unit Angang Steel Co., said in an interview after a press conference today in Hong Kong, without giving details. The parent is “still in talks for the U.S. steel project and, so far, no progress has been made,” he said.

Anshan, based in Liaoning province, is facing hurdles in its global expansion effort as it grapples with overcapacity and a shortage of raw material at home. Its proposed plant in Amory, Mississippi, China’s first steel project in the U.S., poses a national security risk because Anshan is controlled by the Chinese government, U.S lawmakers had said in a letter to Treasury Secretary Timothy F. Geithner in July 2010.

Talks had been held on an Indian steel project with an annual capacity of as much as 3 million metric tons, Anshan said in an e-mailed response to Bloomberg questions on Oct. 13. The project would require an investment of about $2 billion and Anshan may also plan for a plant in an African country, the Financial Times reported then, citing Anshan President Zhang Xiaogang.

India Demand

India’s steel ministry in November estimated the country’s demand may grow at 9 percent per annum over the next five years. Global rivals ArcelorMittal (MT) and Posco, which have at least $32 billion of planned projects in India, have seen delays for years in securing approvals and land.

Anshan is diversifying its markets as domestic demand slows and raw-material costs remain high. China’s major steelmakers incurred combined losses of 2.8 billion yuan ($445 million) in the first two months of this year, the official Xinhua News Agency reported today, citing the China Iron and Steel Association. Angang, the biggest Hong Kong-traded steelmaker, this week posted a second-half loss of 1.93 billion yuan.

Angang is in talks with Anshan Steel about shortening the pricing period for iron ore amid expectations the spot rates may fall 10 percent to 20 percent due to slowing demand, Chen said. The unit bought the raw material from its parent at a 5 percent discount to the average spot price in the previous six-month period, paying more than rivals at a time of declining ore prices. Angang is seeking to peg the rates to a monthly or quarterly basis, Chen said.

To contact Bloomberg News staff for this story: Helen Yuan in Shanghai at hyuan@bloomberg.net

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net


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