Datong Coal Mine, Tongjia Steel to pool resources
Datong Coal Mine Group signed a restructuring agreement on Sunday, November 20, with Tongjia Iron and Steel Company.
Market sources report that the development plan of the newly restructured company will be implemented in two steps. In the first stage, based on the existing
production scale, RMB 250 million ($31 million) will be invested in new equipment to improve product structure. A
production value of RMB 4.075 billion ($500 million) will be achieved after the fulfillment of the first stage.
In the second stage, RMB 2.2 billion will be invested to adopt advanced equipment that will allow the company to produce specialty products and become more competitive in the market. The company will achieve a
production value of RMB 12.4 billion once the second phase is complete.
The rapid development of the iron and steel industry since 2002 has attracted a large amount of investment. However, even though the amount of total investment was large, the plethora of steelmakers in
China meant that individual steelmakers actually saw only a small amount of investment. The continuous expansion of
production scale in recent years has left inadequate follow-up capital for many companies. This is the main reason for tight capital in steel mills.
Insufficient capital is one of the factors that has led to the sharp fluctuations in market prices. Since it is becoming increasingly difficult to maintain high profit margins and capital is tight, many companies in
China are looking to pool their resources through restructurings similar to Tongjia Steel and Datong Coal Mine Group.
Tongjia Iron and Steel Company produces 1.5 million metric tons of sinter ore, one million metric tons of
pig iron, and 1.2 million metric tons of semi-finished products annually. Its 2005 sales revenue is expected to be RMB 2.4 billion. Datong Coal Mine Group is a large-scale coal mine company in
China.
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