China's leading steel maker Baosteel Group said on Tuesday it would form a 35.86 billion yuan (5.12 billion U.S. dollars) joint venture in Guangzhou with two domestic rivals.
Baosteel is to own 80 percent of the new company, with a 28.688billion yuan investment, while Guangzhou Iron and Steel Enterprises and Shaoguan Iron and Steel Group will take a combined20 percent stake with existing assets, Baosteel said in statement to the Shanghai Stock Exchange.
The new venture, the Guangdong Iron and Steel Group, is expected to be established before August.
The Shaoguan Iron and Steel Group is the country's 27th largest steel maker, while Guangzhou Iron and Steel Enterprises ranks 35th. Both must eliminate obsolete facilities, since Guangdong Province vowed to cut its steel-making capacity by 10 million tonnes during the 2006-2010 period.
Shares of the three companies were suspended on Monday ahead of the announcement but resumed trading at 10:30 a.m. on Tuesday.
In the first 30 minutes of trading, Baosteel shed more than 8 percent to 8.99 yuan, while Shaoguan Iron and Steel Group gained 5.71 percent to 5.55 yuan and Guangzhou Iron and Steel Enterprises rose by the daily limit of 10 percent to 5.17 yuan.
Baosteel, which negotiated on behalf of the country's steel industry for iron ore imports, agreed with Australian mining group Rio Tinto on a record price increase for iron ore in 2008.
Baosteel said on Monday night it agreed to a 79.88 percent price hike for Pilbara blend fines and Yandicoogina fines and a 96.5 percent price rise for Pilbara Blend Lump for the contract year starting on April 1.
Source: Xinhua
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