HHI to buy Chinese steel plant

Hyundai Heavy Industries (HHI) is in advanced talks to buy Chinese steel maker Qinhuangdao Shouqin Metal Materials Co. Ltd. after completing due diligence.

“We are in negotiations over the terms of the stake purchase with the selling party,” the company told the Korea Exchange. No financial terms had been decided , Hyundai officials said. In January, China’s Shougang Concord International Enterprises said HHI might invest in its 96%-held Shouqin, which makes steel slabs and plates.

Under their January letter of intent agreement, Shouqin would also become a steady, long-term supplier of hot rolled steel plate to Hyundai. Shougang has said it plans to increase its production capacity for steel slabs to 2.6 million tonnes in 2007 from 470,000 tonnes in 2004. Earlier this year, Hyundai said it planned to more than double imports of Chinese steel plates this year from 2005, mainly due to cheaper prices.

As part of that move, Hyundai will buy 180,000 tonnes of steel plates each year from China’s Jiangsu Shagang Group. Hyundai buys more than half the steel plates for its ships from South Korean steel makers such as POSCO and Dongkuk Steel Mill. The shipbuilder imports about 30% of its steel plates from Japanese makers such as JFE Holdings. On Thursday, Hyundai said talks with major Japanese makers on steel plate prices had faced deadlock.