Baosteel May Consider Shanghai Plant Shift on Environment Curbs

Baosteel Group Corp., the parent of China’s largest listed steelmaker, may consider moving its main factory out of Shanghai to avoid energy consumption and environmental curbs, Chairman Xu Lejiang said.

“Moving may be one of our major tasks between this and the next five years,” Xu told reporters today at an industry conference in Beijing. The company has yet to decide on a new location for the factory, he said.

Baosteel may follow Shougang Corp., the only Beijing-based steelmaker, in moving its factory as the government implements measures to conserve energy and cut pollution in the large cities. Shougang, once identified by the government as Beijing’s largest industrial polluter, built a 67.7 billion yuan ($10.7 billion) plant jointly with Hebei Iron & Steel Group in Hebei province after closing its main facility in Beijing for the city’s Olympic Games in 2008.

“Shougang’s today is our tomorrow,” Xu said.

Baosteel, China’s third-largest steelmaker, has yet to receive government approval for its 10 million-ton plant in the southern port city of Zhanjiang, Xu said. The approval may come this year, he said.

The planned project will increase Baosteel’s production capacity by about 2 percent to 53 million tons and help displace Anshan Iron & Steel Group as the nation’s second-biggest steelmaker, according to data from researcher Custeel.com. It will also help Baosteel meet demand from the Chinese units of Japan’s Honda Motor Co. (7267), Nissan Motor Co. (7201) and Toyota Motor Corp. (7203)

China’s National Development and Reform Commission delayed approving projects planned by Baosteel and Wuhan Iron & Steel Group in 2009 because of industry overcapacity. Steelmakers in China, the world’s biggest producer, had combined first-quarter losses of more than 1 billion yuan, the China Iron and Steel Association said last month, as weakening exports and government curbs on property slowed steel demand.

Anshan Steel has delayed its plan to build a plant in the Fujian province as Baosteel and Wuhan Iron & Steel Group are planning their expansion in the southern Chinese market, Anshan President Zhang Xiaogang said today at the same conference.

To contact Bloomberg News staff for this story: Helen Yuan in Shanghai at hyuan@bloomberg.net

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net

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