Steel sector may open to foreign investment

By Sun Zhe

The government is considering allowing foreign investors to gain controlling stakes of firms in the iron and steel sectors, but analysts are divided on the possible impact the move would have.

The National Development and Reform Commission prohibited foreign control in 2005 when it released the Iron and Steel Industry Development Policy.

But according to a report Thursday in the China Business News, the commission may be reconsidering the ban.

"A more open policy would promote competition in the country’s steel sector by bringing in new products and more advanced technology," said Wu Jing of ArcelorMittal, the world’s largest steelmaker.

ArcelorMittal has acquired 37 percent of Hunan Valin Steel Tube & Wire, an arm of State-owned Valin Iron and Steel Group.

Valin Steel gained new technology by working with Luxembourg-based Arcelor, said Li Xiaowei, chairman of Valin Steel at a forum this July.

Allowing foreign investment will help the ongoing restructuring of the industry, said Fu Yao, a Beijing-based steel analyst. But not all analysts agree.

"If foreign firms are part owners of smaller State-owned mills, it will make it more difficult for domestic enterprises to expand by purchasing them," said Wang Zhe, a steel analyst with CITIC China Securities Research.

"Foreign-invested enterprises won’t be as compliant as they are right now when it comes to mergers and acquisitions," he added.

The country is not likely to permit foreign companies in as the industry is already suffering from overcapacity, and any new investment, either foreign or domestic, would only exacerbate the problem, said a steel analyst who declined to be named.
 

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