Thursday, March 27, 2008

Wuhan Steel gets green light to build plant in Guangxi

Wuhan Iron & Steel Group<600005>, China's fifth-largest steel maker, has got green light from the National Development and Reform Commission, China's top economic planner, to start preparation work on a 10 million-ton steel plant in Guangxi province, according to its partner Liuzhou Iron & Steel Co<601003> in a statement to the Shanghai Stock Exchange yesterday.

Earlier in December 2005, Wuhan Steel signed an agreement with the Guangxi government to launch a new venture on a restructuring basis, which will be located in Fangcheng Port with a registered capital of RMB 12.76 billion.

Wuhan Steel will pay RMB 6.5 billion ($921 million) in cash for 51% of state-owned Liuzhou Iron & Steel Group, Liuzhou Iron & Steel Co's parent, and the Guangxi provincial government will take the residual 49% by investing all net capital of Liuzhou Iron & Steel Group, according to the agreement.

Guangxi province and Wuhan Steel must shut 9.1 million tons of capacity to be permitted to build the new plant, the commission said on March 19, because of the government's effort to rein in expansion of steel capacity since 2004.

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