Hebei Province-based Chinese steelmaker Hebei Steel Group recently announced its intention to withdraw from the project for the construction of a steel production base in Caofeidian, Hebei Province, and this has now also been confirmed by China's National Development and Reform Commission (NDRC).
Hebei Steel plans give up its stake in the project, in which it holds a 49 percent share. Beijing-based Shougang Steel Group, which holds the other 51 percent, has stated that while it was intending to secure the whole stake being sold by Hebei Steel it will be unable to afford to do so. It is now widely speculated that Kailuan Group, the largest coal enterprise in Hebei Province, will acquire part of the stake being sold by Hebei Steel, while Shougang Steel will acquire the remainder.
In 2011, Kailuan Group targets total raw coal production of 70 million mt and an operating revenue exceeding RMB 100 billion ($15.24 billion).
As previously reported by SteelOrbis, last week an insider at Hebei Steel Group indicated that the investment for the new steel production base was very large, at nearly RMB 50 billion, and that asset depreciation exerted great pressure on the company. Influenced by weak demand in the market, the Caofeidian joint venture may suffer large losses, while main management positions and operations were controlled by Shougang Group. As a result, Hebei Steel Group had decided to withdraw from the joint venture, the insider stated.