China's largest steelmaker Baosteel is seeking to more than triple its steel output from 23 million tons to 80 million tons by 2012 by acquiring other producers in a national industry restructuring drive.

 

It also expects to boost its sales to over $50 billion a year and profit to over $5 billion by then, according to an internal newsletter.

 

Baosteel, the world's fifth-largest steelmaker, also said in the newsletter that it aims to be one of the world's top three producers in terms of competitiveness.

 

"Baosteel has to increase its output, mainly through mergers and alliances with other mainland companies," Xu Lejiang, president of Baosteel, was quoted as saying in the newsletter.

 

"Baosteel will mainly focus on strategic cooperation, including product complementation, with prospective partners. Some other factors like scale of operations, location and costs are also being considered," Chen Ying, board secretary of Baosteel Co Ltd, told China Daily.

 

Chen declined to comment on market rumors about Baosteel's impending acquisition of Jiangsu Shagang Group, a steel producer based in smaller eastern city ZhangJiagang.

 

Liu Baoyao, an analyst at Guangfa Securities, said Baosteel's targets should not be hard to meet at the company's current pace of growth.

 

Liu said Baosteel's Zhanjiang project, which is expected to get the government's approval soon, is likely to boost the group's output by 20 million tons by 2012.

 

"Besides, Baosteel's holding company Bayi Iron and Steel has an annual capacity of 3.6 million tons. Baosteel's joint venture with Handan Steel is also expected to bring Baosteel an annual capacity of 2.5 million tons," said Liu.

 

In addition, Baosteel's alliances with Baotou Steel and Ma'anshan Steel, which may lead to a merger in the near future, is also likely to bring Baosteel around 7.5 million tons in output, said Liu. "Baosteel is also expected to reduce the manufacturing costs by exploring mines overseas."

 

In 2005, the National Development and Reform Commission set new targets for China's steel industry. It said the output of the nation's top 10 steelmakers should account for over 50 percent of the country's total output by 2010 and over 70 percent by 2020.

 

(China Daily September 5, 2007)