Baoshan Iron and Steel, the mainland's biggest steelmaker, will buy assets such as a steel-plate plant from its parent for as much as 14.3 billion yuan (HK$15.07 billion) to meet rising demand from shipbuilders.
Shanghai-based Baoshan Steel plans to sell up to 10 billion yuan of six-year bonds that can be converted into shares to help fund the purchase, according to a Shanghai stock exchange filing yesterday. The company didn't disclose details of the proposed bonds.
China is constructing more shipyards to overtake South Korea as the world's biggest builder by 2015. Baoshan Steel is seeking to buy more assets from parent Baosteel Group to boost earnings, president Fu Zhongzhe said in August.
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"Baoshan Steel is buying assets to optimize its product structure," said Lu Yizhen of CITIC Prudential Fund Management before the statement was released.
Trading of Baoshan Steel shares, suspended yesterday, will resume in Shanghai today. The stock, up 95 percent this year, rose 1 percent to 16.88 yuan on Monday.
The company will pay Baosteel over five years for the steel-plate plant, which has an annual capacity of 1.6 million tonnes.
The factory started production last month in Shanghai's northern outskirts.
The plant uses "Corex" technology to make steel from iron-ore pellets and unprocessed coal, which is at least 30 percent cheaper than the coking coal usually used in steel production.
Baosteel said in March that it will buy 35 percent of Changxing shipyard, to be the country's biggest on completion.
It paid 200 million yuan last Wednesday for 1.44 percent of Xinhua Metal Products, China's second-biggest maker of ship steel.
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