China's Hebei Iron & Steel Leads 5 Million-Tonne South African Steel Project

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--A high-volume steel plant is to be set up in South Africa's Limpopo province by China's largest steelmaker, state-owned Hebei Iron & Steel Group (Shijiazhuang).

The plant will have an annual output of 5 million tonnes when completed. Construction on the first 3 million-tonne phase will begin in 2015 and will be commissioned in 2017. The second phase, with an annual capacity of 2 million tons, will go into production in 2019.

The cooperation agreement to proceed with the project was signed in Beijing by the Hebei Steel Group, the Industrial Development Corporation (IDC) of South Africa (Johannesburg) and the China-Africa Development Fund. The expected total investment in the project was not disclosed. Hebei will have a 51% stake in the venture.

The project is an important step by the steel group to implement China's industrial restructuring and the strategy of the country's steel sector "going abroad," Hebei President Yu Yong said.

Hebei province, which neighbors Beijing, is heavily polluted. Hebei is facing the challenging task of cutting its excessive iron and steel capacities in line with the country's move toward economic restructuring and air-pollution reduction.

IDC Chief Executive Officer Geoffrey Qhena said that the project will help lower the high prices of steel products, boost industries downstream of the steel sector, and create more jobs.

In August 2013, a consortium consisting of Hebei (35%), IDC (20%), a privately owned Chinese trading company (25%) and diversified group Tewoo (Tianjin) (20%) acquired a 74.5% share in copper and magnetite producer Palabora Mining Company (Phalaborwa, South Africa) from Rio Tinto (NYSE:RIO) (London, England) and Anglo American (London, England) in a share deal valued at $476 million. The 240 million-ton magnetite resource will feed the steel plant, which is expected to be sited nearby.

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