By staff reporters Han Wei, Zhao Jianfei, Zhang Boling and Yan Jiangning

(Caijing.com.cn)Hunan Valin Iron & Steel Group Co. plans to expand its annual production capacity to 30 million tons.

Li Xiaowei

In a March 11 interview with Caijing, Valin’s chairman Li Xiaowei said the company will try to reach its goal through mergers and acquisitions. Li said the current market conditions provide a good opportunity for consolidation in the steel sector.

In January, the State Council, China's cabinet, issued a stimulus plan for the domestic steelmakers that encourages consolidation to shore up the industry during the global downturn.

The governmental plan aims to forge a handful of large steel groups with an annual production capacity of about 50 million tons – large enough, the government hopes, to be competitive in the global market.

After the proposed consolidation is complete, about 45 percent of total production capacity would be in the hands of China’s top five steel groups including Baosteel, Angang Steel, and Wuhan Iron & Steel.

On February 25, Valin announced an AU$ 558 million investment in Australian Fortescue for 225 million shares. The deal would bring its stake in the Australian company to 16.48 percent. On March 10, Fortescue said it will sell another 35 million shares to Valin at AU$ 2.48 per share. The two companies agreed to eventually bring Valin’s stake to a maximum of 17.55 percent.

Valin’s Fortescue investment is waiting for approval from Australia’s Foreign Investment Review Board. Li said he is confident that the deal will receive the board’s endorsement by the end of March.

To make it trough the wire, Valin has speeded up its expansion. According to Li, Valin will invest about 10 billion yuan into a batch of new steel projects this year.

Full article in Chinese: http://www.caijing.com.cn/2009-03-12/110118704.html