By William Bi, Bloomberg
Beijing: Wuhan Iron & Steel Group Corp., the parent of China’s fifth-biggest steelmaker, may expand in India as it considers building or acquiring overseas plants due to domestic constraints and as it seeks access to raw materials.
“We want to target emerging markets, such as Southeast Asia and India, where you have bigger growth potential,” said He Kangyang, director of overseas business at Wuhan Steel’s international division in Guangzhou yesterday. India was particularly attractive because it also has iron ore, he said.
China has cut export steel rebates as it forces smaller and less efficient steel producers out of the market and moves to curb the country’s surging trade surplus. The China Iron and Steel Association said on Monday that Chinese steel exports in 2007 would be unchanged to lower from 2006.
Large companies such as Wuhan Steel had to expand sales outside mature markets, such as the EU or the US. The company, based in Wuhan city, the capital of China’s central province of Hubei, was exploring overseas opportunities, he said.
Shortages of raw material will also limit growth of Chinese steelmakers, and India’s decision to limit iron ore exports will make it increasingly difficult to secure supplies, he said.
India, on 28 February announced a tax of Rs300 ($7) a metric ton on iron ore exports in a bid to ensure local supplies are sufficient to meet domestic demand. The country provided 23% of China’s 326 million tons of iron ore imports last year, making it the second-biggest supplier after Australia.
Cuts in export rebates will have long-term effects on Wuhan Steel’s exports, He said. “Exports will be hit pretty hard, at least for the first couple of months.”
Wuhan Steel shipped 1.32 million metric tons of steel in 2006, a 46% rise from a year ago, He said.