China’s second-biggest steel producer, Hebei Iron and Steel Group, has confirmed that it is planning to build a five-million ton per year steel plant in South Africa in 2017, an official said recently.
“We are now choosing a location,” Zhang Hai, VP at Hebei Iron and Steel, told an industry conference.
Zhang said the company is also aiming to take over steel mills in Eastern Europe, but added that talks are still at an early stage.
The move underscores how policy pressures are reshaping the world’s largest steel industry. While China has for years sought to acquire more raw mining assets abroad, investments in steel plants overseas are rarer and may now signal a shift as environmental costs pressure steelmakers at home.
Last year state-owned Hebei said it has signed a deal to take a 51% stake in a venture with the Industrial Development Corp. of South Africa and the China-Africa Development Fund to build what would be the country’s biggest overseas steel mill. The plant will produce five million metric tons mostly of construction steel when completed in 2019, the Chinese steelmaker said.
Hebei, which already owns iron-ore and copper mining assets in South Africa, didn’t disclose financial details of the deal.
China is home to 43% of the world’s steel production, a legacy of sorts of Mao Zedong’s drive in the 1960s to modernise the country’s economy by encouraging steel smelters in every backyard.
Hebei Iron & Steel itself came under pressure from Beijing in 2014 for contributing to excessive industrial capacity and environmental pollution.
Locating steel plants overseas would conform with government hopes that state-owned companies will venture more aggressively abroad, which includes Chinese moves in recent years to cultivate a strategic relationship with African nations.