Hebei Steel takes 51% holding in Duferco

Deal with Swiss trader will help company expand overseas presence

Hebei Iron and Steel Group Co Ltd has taken a controlling stake in Switzerland-based Duferco International Trading Holding, a move that will help China's largest steel producer expand its presence in the global markets.

The two companies signed an agreement to the effect on Tuesday whereby HBIS will acquire a 51 percent stake in DITH, the biggest steel trader in the world. The two companies, however, did not disclose the total value of the deal.

As part of the agreement, HBIS will use DITH's global marketing and distribution presence to further enhance its position as a global steel supplier, said Hebei Steel sources.

Yu Yong, president of HBIS, said that the "going global" strategy is an inevitable and important step for the company's future development.

In March 2013, HBIS's subsidiary Tangshan Iron and Steel Group Co, or Tangsteel, acquired a 10 percent stake in Duferco.

"It's a logical and organic process for Duferco to expand its cooperation with Tangsteel and then to its parent company," said Matthew De Morgan, chief executive officer of Duferco.

The center of gravity in the global steel industry has shifted to Asia and the partnership will provide Duferco with unparalleled access to an essential region and the industry as a whole, De Morgan said.

DITH will help Tangsteel sell 3 million metric tons of steel products this year in overseas markets, he said.

According to Tangsteel officials, about 30 percent of the steel products produced by the company during the first six months of the year have found their way to the overseas markets.

"The absolute volume is not the priority," said De Morgan. "DITH has been maximizing the diversity and quality range of the Chinese steel company's products exported to foreign markets, which is the biggest added value we bring to this business."

Liu Jian, head of the international cooperation department of HBIS, said the alliance will help the company avoid increasing trade disputes in the steel sector based on the rich experience of DITH.

Bruno Bolfo, chairman and founder of DITH, said the deal will provide Duferco stable steel supplies and opportunities to grow its business in China and the rest of Asia.

China's steel industry has been suffering from overcapacity in recent years and many large-scale producers are trying to explore overseas markets and develop non-steel businesses to survive the market.

However, the Chinese government has never encouraged steel exports.

Zhang Changfu, vice-chairman of the China Iron and Steel Association, said as a high energy-consuming industry, the major target for the nation's steel sector is to cater to domestic needs.

China exported 65.34 million tons of steel products during the first nine months of this year, up 39 percent year-on-year, according to customs data.