Province's new focus for selling iron, steel

Companies in Hebei province are eager to invest in Africa because of the continent's abundant natural resources, strong labor force and huge market demand, industry insiders say.

"Africa is now an attractive place for competitive industries from Hebei," Yang Chongyong, vice-governor of the province, said at the opening of the China (Langfang) International Economic and Trade Fair on May 18.

During the fair, which this year focused on trade with Africa, two enterprises from Hebei and another based in Beijing agreed to invest 160 million yuan ($25.8 million) in a joint venture with a Malawi company to produce explosives for civilian use in the southeast African country.

Almost 50 Hebei companies had invested in African countries as of last year, with three in Madagascar, six in Uganda, one in Sudan, five in Ghana, seven in South Africa, four in Algeria, two in Cameroon, 12 in Ethiopia and five in Kenya, according to the provincial government.

The investment areas range from the exploration of mineral resources and real estate development to the production of cork products and cement.

In August 2013, Hebei Iron and Steel Group, China's leading steel maker, paid $234 million for a 35-percent controlling stake in South Africa's Palabora Mining Co. The acquisition gave the company access to about 270 million metric tons of iron and 200 million tons of copper.

Palabora Mining went on to yield and sell 8 million tons of fine iron powder last year, generating a profit of more than $100 million, according to Yu Yong, chairman of Hebei Iron and Steel.

After enjoying the success of its first investment in Africa, Yu says his company began construction on a steel mill in South Africa in September. The project is expected to produce 5 million tons of steel a year.

The first phase will begin construction at the end of this year, with the mill scheduled to go into operation in 2017. The second phase is to start operation in 2019, the company says.

Yu says the project is in line with China's national strategy to encourage enterprises to go out as well as Hebei's plan to adjust its industrial structure.

The province, which neighbors Beijing, is under pressure to reduce its iron and steel capacity to 60 million tons by 2017.

"With slowing domestic demand and Hebei's industrial restructuring policies, our company made the rational choice to invest in South Africa," Yu says. "In Africa there are rich iron ore resources, and the price of iron and steel products is more competitive in this market."

The company will continue to expand its business in South Africa, in the hope of establishing a chain for copper products with sales revenue of $10 billion in the next three years, Yu says.

Contact the writers at zhangyu1@chinadaily.com.cn