Largest Steel Maker to Emerge in Hebei /Chinese Ports Told to Clear Iron Ore Stocks

Largest Steel Maker to Emerge in Hebei

The merging of Tangshan Iron & Steel Group and Handan Iron & Steel Group will create China's largest new steelmaker.

The merging of Tangshan Iron & Steel Group and Handan Iron & Steel Group in Hebei is nearing conclusion, resulting in the newly founded Hebei Iron and Steel Group Co., which is set to inaugurate next month.

Caijing learned that Hebei Iron and Steel will have a registered capital of 20 billion yuan. The Hebei provincial State-owned Assets Supervision & Administration Commission will inject 50 million yuan into the new company and transfer to it state-owned assets from Tangshan Steel and Handan Steel.

The two steel firms will thus become the new company's subsidiaries.

A source familiar with the case told Caijing that the plans of forming Hebei Iron and Steel Group are soon to be submitted to the provincial government for approval. The source expects the procedure to go smoothly, since the rough draft previously won the government's nod of approval.

According to the plan, the new company is set to complete registration by June 30. The managerial appointments will be confirmed in late June.

The deputy governor of Hebei province, Sun Ruibin, last week disclosed that the new Hebei Iron & Steel will maintain an annual production capacity of around 32 million tons, overtaking the Shanghai-based Baosteel Group to become China's leading steel maker by output.

It is reported that Wang Yifang, general manager of Tangshan Iron and Steel Corp., will be appointed director of the new group.

Hebei Province, in northeast China, is one of the country's major steel producing provinces. In 2007, the steel mills in Hebei produced more than 120 million tons of steel. The aggressive merge is believed to further strengthen Hebei's already solid status in the steel industry.

Tangshan Iron & Steel produced 22.75 million tons of steel last year, while Handan Iron & Steel had an output of 9 million tons in 2007.

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Chinese Ports Told to Clear Iron Ore Stocks

Government urges ports and importers to clear excess ore stocks. However, situation is hardly changed in short term.

Last week China urged domestic ports to clear excessive iron ore storages, as the stockpiles have clogged ports operations.

Speculations on rising prices have led to a massive inflow of iron ore and overstocking in Chinese ports. A source from Lianyungang port, one of the country's largest sea ports, told Caijing that, by the end of May, the storage volume of iron ore in the port has reached 5 million tons, exceeding its normal capacity of around 3 million tons.

A joint announcement released by the National Development and Reform Commission, the Ministry of Commerce, the Ministry of Transport, and the Ministry of Railways, has asked domestic ports to investigate iron ore stockpile volumes and submit detailed reports on stocks by June 20.

Ports are also required to collect fees for excess iron ore stocks, while importers are urged to move the stocks out as soon as possible.

Caijing learned that some major ports including Tianjin port and Lianyungang port have started increasing warehousing fees of iron ore to tackle the issue of overstock.

A staffer of Tianjin port told Caijing that the port has raised fees since June 1. The daily charge per ton was lifted to 0.10 for 30 to 60 days of storage, 0.20 yuan for 60 to 90 days, and 0.40 yuan for more than 90 days.

The port of Tianjin usually charges 0.10 yuan per day for every ton of stored iron ore, although the charges kick in only after a stockpile has sat for 90 days.

The port of Lianyungang has also raised warehousing fees for iron ore since June 1, while another major port in Qingdao said it is studying a new fee plan for iron ore.

However, source from Lianyungang port told Caijing that the situation of ore overstock will hardly be changed in the short term, since the government's prioritization of coal and oil transportation has spawned smaller capacities for railway shipments of iron ore to steelworks.

Moreover, importer speculation on rising iron ore prices in the international market in response to the ongoing China-Australia price talks has been driving increasing imports.

Data from the China Iron and Steel Association shows that iron ore stockpiled at China's major ports had exceeded the 67 million tons set June 6, having already increased more than 1 million tons since May 16.