FPC gets technical support from CSC to build large-sized steel mill

Taipei, March 28, 2005 (CENS)--Formosa Plastics Corporation (FPC), Taiwan's largest plastics conglomerate, will cooperate with China Steel Corporation, Taiwan's largest steelmaker, to build a large-sized steel mill in Taiwan.

CSC said it would provide technical assistance to help FPC single out high-quality production equipment needed for the launch of a large-sized steel mill. FPC has preliminarily promised to give out 5% stake in its steel mill, or worth NT$6 billion (US$191.08 million at US$1:NT$31.4), with the addition of transferring its unique management method.

To further cement the cooperation relationship, CSC vice president Chen Yuan-cheng recently visited FPC's Mailiao naphtha cracking complex in Yunlin County, central Taiwan and called on Wu Kuo-hsiung, president of FPC's affiliate Formosa Heavy Industries Corp. which is in charge of building up the proposed large-sized steel mill.

A FPC executive stressed the strategic alliance was launched following several rounds of negotiations between both sides. But it's still unknown if the cooperation relationship will change or expand. He hoped construction of the proposed large-sized steel mill can be started by the end of this year.

CSC is encountering the same problem as it faced about 32 years ago when it launched construction--insufficient supply of specialists in the iron and steel sector. CSC said it would first help FPC to conduct the qualification screening procedure on the procurement of a reliable blast furnace.

If the relationship can be expanded, CSC will not rule out investing in FPC's steel mill just like its investment in the Japan-based Maruichi Steel Tube Ltd.

As CSC has promised to offer needed technical support to assist FPC to build up the NT$120 billion (US$3.82 billion) steel mill, the latter will allow the former to hold at least a 5% stake, or NT$6 billion (US$191.08 million), in the new steel mill.

A CSC high-ranking official said it contacted FPC for selling steel products to help it erect the Mailiao naphtha cracking complex a few years ago. During the construction peak of the naphtha cracking complex, the FPC procured as many as 20,000 metric tons of steel products quarterly.

At present, FPC's affiliate Formosa Heavy Industry procures an average of 5,000 metric tons of steel plates for the production of large-sized gears and pressurized tanks from CSC per quarter. On the other hand, CSC procures gears worth NT$30 million (US$955,410) from Formosa per quarter.

FPC's proposed steel mill will be able to roll out 7.5 million metric tons of steel billets after it begins mass production and CSC's affiliate Dragon Steel Corp., which is now building a plant in the Taichung Harbor area of central Taiwan, two million metric tons, per year. These two plants will be able to roll out close to 10 million metric tons of steel billets per year. But Taiwan currently imports seven million metric tons of steel billets per year.

CSC said both sides have to work closer to get rid of head-on competition after they commence mass production of steel products