citic to sell half of balmoral

Higher steel prices to benefit Angang
(HK Edition)
Updated: 2006-04-13 06:43
source: http://www.chinadaily.com.cn/hkedition/2006-04/13/content_566633.htm

Angang New Steel Co Ltd said yesterday its gross profit margin should rise to above 20 per cent this year thanks to higher steel prices and the purchase of its parent company's steel production business.

Angang, the listed arm of Anshan Iron & Steel Group, the number-two mainland steel maker by capacity, said its gross profit margin had come to 14.8 per cent in 2005 against 15 per cent in 2004.

"Our first-quarter sales were good and our products were unable to meet demand," Chairman Liu Jie told reporters.

"Steel prices recovered earlier this year and our product prices also rose," he said without giving a forecast.

Angang, which makes sheets, billets, thick plates and other higher value-added products for appliances and automobiles, posted an 18 per cent rise in net earnings in 2005 to 2.1 billion yuan (US$262.2 million).

The company set aside 7.3 billion yuan in capital expenditure this year, of which 2.3 billion yuan would go toward an 18 billion yuan deal to buy manufacturing assets from its parent company.

After the deal, the listed company aimed to more than double its steel products output to 14 million tons this year, compared with 6.05 million tons in 2005.

"Our gross profit margin will rise significantly this year, to above 20 per cent," executive director Fu Jihui said.

The company now gets about 85 per cent of its iron ore from mines owned by its parent company, meaning it is less vulnerable to higher imported iron ore prices than many of its domestic rivals.

The mainland's steel makers are lingering over talks with overseas iron ore suppliers, trying to reach agreement on import prices.

The mainland has said it would not accept a big price increase, and has threatened to step in to cap prices after being forced last year to swallow a 71.5 per cent price hike along with the rest of the world's steel makers.

Iron ore

Angang's parent company had recently forged an agreement with Gindalbie Metals Ltd to jointly develop the Karara iron ore project in Australia on the hopes to secure raw material supply.

That marked the second investment in Australian iron ore in two weeks by a mainland steel maker, as the mainland's fast-growing mills turn to its iron-rich ore belt to supply some of the massive imports of the raw material they need.

"Initial exploration showed that the mine has 700 million tons of reserves. Both companies are interested in the project and we will cooperate to further explore the mine," said Liu, who is also the President of Anshan New Steel.

Initial investment for exploration of the project was around US$18 million and would be shared equally by the two companies.

But Liu said the parent had no immediate plan to sell the iron ore project to the listed company.

Last week, conglomerate CITIC Pacific Ltd announced a nearly US$3 billion deal to buy and develop an iron ore mine in Australia's Pilbara region.

CITIC Pacific had said it would sell half of the rights in the Australian iron ore project to a big mainland steel company. But Liu said there Angang and CITIC Pacific had not discussed the Pilbara project.


(HK Edition 04/13/2006 page3)