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China okays two big new projects - 4 January 2012

This year China’s national development and reform commission (NDRC) intends to speed up the launch of construction at Baosteel’s Zhanjiang steelworks project and at the Fangchenggang project of Wuhan Iron & Steel (Wugang).

This unequivocal pledge delivered by NDRC director Zhang Ping at a government conference in Beijing recently was reported on the China Iron & Steel Association website on 30 December. The statement from such a senior government official has led market analysts to suggest the two long-awaited projects could be launched quite soon.

Baosteel and Wugang have been waiting for NDRC go-ahead for their coastal steelworks plans since 2008. That year the NDRC approved the start of preparation work at the two sites but China’s most powerful administrative body has been largely silent about them since. Concern about overcapacity in the country’s steel industry is thought to be the reason.

Baosteel’s Zhanjiang project in Guangdong province is now deemed feasible as its construction is predicated on the closure of 2-3m t/y of outdated steel capacity at the province’s Guangzhou Iron & Steel.

Indeed, coinciding with last week’s NDRC’s statement, the country’s State-owned Assets Supervision & Administration Commission (SASAC) approved a proposal that Guangdong SASAC will transfer 51% of its shares in Shaoguan Iron & Steel (Shaogang) to Baosteel free of charge. This smoothes Shanghai-based Baosteel’s takeover of Shaogang and thus clears the last obstacle for Baosteel to launch its Zhanjiang project.

Baosteel has revealed no details about its Zhanjiang project but the works will likely have a 5m tonnes/year steel capacity after phase one construction and will eventually reach 9-10m t/y. The 5m t/y steelworks will house hot strip mills, cold strip mills and coating lines.

Meanwhile, progress on Guangxi province’s Fangchenggang steel project will also require some plant closures and Wugang’s takeover of Liuzhou Iron & Steel (Liugang).

Although Wugang has received central government approval for its 2011-2015 development plan, which includes building its 10m t/y Fangchenggang works, the central China mill still hasn’t announced a timetable for completing its Liugang acquisition. <b>Steel Business Briefing</b> believes Baosteel might get to start constructing its coastal mill earlier than Wugang.

 

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