Top Biz News

Baotou Steel eyes HK rare earth IPO

(China Daily HK Edition)
Updated: 2006-09-08 15:25

Baotou Iron and Steel Group hopes to list its rare earth assets in Hong Kong next year and plans to inject the group's steel assets into its listed Shanghai arm by the end of the year, its top executive said.

Baotou, the mainland's twelfth-largest steel mill, is also still in talks with the world's number-one Mittal Steel for a stake sale, group chairman Lin Donglu said yesterday.

The group is seeking funds to help expand its rare earth ore output and downstream processing capacity, to meet a projected growth in world demand for rare earth minerals to 200,000 tons by 2010, from about 130,000 tons now.

"This year we want to list our entire steel assets in Shanghai. We have already applied for central government permission. I am afraid the Hong Kong listing probably wouldn't take place until next year," Lin said on the sidelines of a conference organized by Metal Pages and the Chinese Society of Rare Earths.

Baotou Group's Inner Mongolia Rare-Earth Hi-Tech Co Ltd is already listed in Shanghai.

Meanwhile, Baotou is actively seeking a partnership with Mittal, the world's largest steel firm, Lin said, without specifying the size of the stake it hoped to sell. Mittal had earlier sought a 49 per cent stake, sources had said.

"We are still considering (a deal with Mittal). We hope to cooperate with domestic and foreign companies, but any big move has to be in line with national policy," Lin said. China forbids foreigners from taking a controlling stake in domestic mills.

"We are very interested. We recently visited their UK operations and looked at their US operations as well, soon we plan to take a look at their European businesses. Why? Because we hope any future cooperation would encompass the technical side too."

Talk of Baotou's tie-up with Mittal had spurred China's largest firm, Baosteel Group, to begin talks with the Inner Mongolian firm, in part to keep the rare earth assets in Chinese hands.

"Baosteel has brought it up, but we think we should complete the discussions with Mittal first and report back to Beijing before turning to detailed talks with them," Lin said.

Mittal already has a stake in one steel mill on the mainland, the listed arm of tenth-largest Hunan Valin and may acquire another stake through its takeover of the world's number-two, Arcelor SA, which has agreed to buy into the mainland's eighth-largest, Laiwu Iron and Steel.

The mainland is rich in rare metals, used in applications as diverse as the aerospace industry, electronics, lighting, and magnets, but exports much of its output as raw material rather than processing domestically.

Baotou Group produced 100,000 tons of rare earth concentrates in 2005, Lin said.

Beijing is now urging consolidation in the sector, more rational use of the country's resources, and more value-added processing domestically.

Ultimately, the mainland will see a consolidation in the rare earths industry, creating national giants, Lin said.

"Maybe in the end there will be two companies, maybe just one."

"Right now we are only cooperating with companies currently off-taking our rare earth minerals. In the future we may consider cooperation with rare earth hubs in South China."