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- Private steel giant looks abroad for growth
Date: 18-Sep-2007 Sources: (Shenzhen Daily)
A STATUE of a pawing bull stands at the entrance to Shagang Group's steel plant on the banks of the Yangtze River, a powerful symbol for a private upstart that has muscled its way to become China's fourth-largest steelmaker.
Unusual in a sector dominated by State-owned firms, Shagang has leveraged its market focus and opportunism over three decades to grow from a tiny maker of iron window frames to a behemoth producing 14.6 million tons of steel last year.
Now it is looking abroad to maintain its independence as the government pushes a consolidation drive that favors State-owned firms, particularly Baosteel Group in nearby Shanghai, while keeping potential foreign partners at arms' length.
Last month, Shagang bought 90 percent of the Savage River iron ore mine and pellet plant in Tasmania from British steel trader Stemcor Group. It will provide the capital needed to extend the mine's life until 2023, securing itself more than 30 million tons of pellet supply.
'Shagang is a purely private company, that means they can develop themselves with an absolutely market-oriented strategy with few restrictions from the government, and they did,'said Zhao Yushen, analyst at Beijing-based consultancy Custeel.com.
'However, like other successful private firms, Shagang is facing a bottleneck in its development. Obviously, they plan to expand their facilities, but their rivals do not want to see that.'
The firm plans an international stock listing in the next few years, and has enlisted Goldman Sachs to help, a source with knowledge of the plan said.
A Baosteel spokesman declined to comment last week on local newspaper reports that it was interested in buying into Shagang as part of its plan to reach 80 million tons of capacity by 2012, from less than 30 million tons now.
'A Baosteel delegation visited here in August to talk a bit. But they didn't discuss a merger at all,'said a Shagang official, who declined to be named.
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