Taiwan's China Steel Corp. Expands Investments in ASEAN Market

The board of China Steel Corp. (CSC), the largest steelmaker in Taiwan by size, recently approved several new investments, mostly to boost the firm's presence in the ASEAN (Association of Southeast Asia Nations) bloc.

Among these new projects, the acquisition of a 5% stake in the China Steel Sumikin Vietnam Joint Stock Company (CSVC) from other shareholders for US$26.15 million is particularly notable, given that the joint venture, which owns a steel complex in southern Ba Ria-Vung Tau Province, is the Taiwanese steelmaker's largest investment in Southeast Asia.

With paid-in capital of US$1.148 billion, CSVC was formally founded in October, 2009, by several firms from Taiwan and Japan, starting with CSC and Nippon Steel & Sumitomo Metal Corporation. Presently, CSC commands a 51% share of the joint venture, along with Nippon Steel & Sumitomo and Formosa Ha Tinh Steel Corporation, a Vietnamese steel firm affiliated with Taiwan's Formosa Plastics Group, which control 30% and 5%, respectively. The remainder of the stake is held by Taiwan's Hsin Kuang Steel Co., Ltd. and Chun Yuan Steel Industry Co., Ltd., and Japan's Sumitomo Corporation and Sumitomo Metal Logistics Service Co., Ltd.

The joint venture's steel complex became operational last October. Materials for production of hot-rolled steel at the facility is supplied by CSC. The Taiwanese steelmaker recently delivered about 60,000 tonnes of raw material to the steel complex in July.

CSC's decision to increase its stake in CSVC by 5% was prompted by Sumitomo Corporation's intention to withdraw from the joint venture after the merger between Nippon Steel and Sumitomo Metal into Nippon Steel & Sumitomo Metal. The company's operations mostly overlapped with Nippon Steel's after the merger. To maintain the partnership with Nippon Steel & Sumitomo Metal, CSC will acquire Sumitomo's stake, boosting its shareholding ratio to 56%.

The move will help CSC maintain close ties with its Japanese partner, as Nippon Steel & Sumitomo Metal boasts extensive distribution and sales network across Asia. By working closely with it on CSVC, CSC expects that the joint venture will boost its sales in Southeast Asia and help it to penetrate India, Pakistan and the Middle East to generate profits within the shortest possible time.

CSVC's steel complex has four operational production lines, with planned annual capacity of 500,000 tonnes of cold-rolled steel coils, 300,000 tonnes of hot-dipped galvanized steel coils, and 200,000 tonnes of electromagnetic steel coils and pickled and oiled steel coils each. The complex is expected to generate turnover of up to NT$30 billion (US$1 billion) yearly starting in 2015, when it will be in full swing.

CSC has also decided to invest US$13.87 million to increase its stake in Sakura Ferroalloys Sdn. Bhd., a tri-party joint venture between CSC, Assmang Ltd. and Sumitomo Corporation. The company currently owns a 19% share of the joint venture.

Banner Q2

CSC also reported banner performance for the second quarter of this year. The firm's latest financial report shows that net profits for the quarter totaled NT$5.513 billion (US$183.76 million), up 42% quarter-on-quarter, or 5.5% year-on-year, to reach a two-year high, and posted an EPS (earnings per share) of NT$0.34. The company also finished the first half with net profits of NT$8.781 billion (US$292.7 million) and an EPS of NT$0.58. (SC)