China Steels the Show!

The land of opportunity. No, I am not referring to the U.S. Today, the land of opportunity is by far China. The economy is growing and the Chinese market is growing. More and more funds are flowing into the country and funds are earning increasing returns.

When someone says “Made in China,” what do you think about? Probably cheap electronic goods (at least that’s what I think of). But while we were feeling thrilled with being able to buy really cheap DVD players and torches, China’s steel industry was growing at a phenomenal pace. The high growth rates have been experienced not only in production, but also in consumption. Currently, China is the world’s largest producer as well as consumer of steel.

Notwithstanding the spiraling steel prices, the global demand for the metal is expected to grow to 1.28 billion tonnes this year, up almost 7% from last year’s figure, according to research group International Iron and Steel Institute (IISI). This record steel consumption would be led by China, India, Russia and Brazil, the IISI believes. The robust growth of China’s steel industry has been supported by rapid economic growth, a low-cost production base and increased government support. The steel industry’s solid fundamentals and prospects are drawing in massive investments.

ArcelorMittal, the world’s largest steelmaker, is currently in preliminary talks with China’s Angang Steel for a possible merger. According to the Financial Times, ArcelorMittal’s CEO Lakshmi Mittal has offered to acquire a stake of nearly 25% in Angang Steel, which is the world’s second largest steel company. The merger deal could be worth at least US$5 billion, considering Angang Steel’s current market valuation, the newspaper said.

In another development, China’s Xinxing Group and China National Metal Products have formed a joint venture with India’s Sigma Minmet Ltd, Kelachandra Group and Manasara Group. The total investment into the venture, named Xindia, is $2.2 billion. While the Chinese companies hold a 55% stake in Xindia, the remaining 45% is owned by the Indian partners.

So, China’s steel industry is really steel-ing the show!