Bloomberg reported that Baosteel Group Corp overseas expansion plans will focus on raw materials until a clear picture emerges about global steel demand.

Mr Xu Lejiang chairman of Baosteel said other Chinese steelmakers are also likely to hold back from large scale capacity expansion overseas in the next three to five years as they focus on completing domestic mergers. He said that “Currently the majority of Chinese steelmakers don’t have a very clear strategy in overseas expansion.”

He added that “I plan to just focus on resources and won’t consider merging steel capacity or making new investments in building plants overseas unless I have a clear idea of how the market will grow.”

Mr Xu said when Chinese steelmakers seek to expand overseas they will probably focus on Brazil, Russia, India, the Middle East, Southeast Asia and Africa. State owned Baosteel based in Shanghai is China largest steelmaker.

Baosteel which controls listed Baoshan Iron & Steel Co in October won regulatory approval from Australia to buy a 15% stake in Aquila Resources Ltd for AUD 285 million. Aquila has announced plans to develop an iron ore project in Western Australia and coal mines in Queensland.

Mr Xu said Baosteel may ask a Chinese coal company to help with the development of coal resources at Aquila Resources. He didn’t name potential partners He said that China may produce 570 million tonnes of steel this year with net exports of 1 million tonnes. This compares with the 565 million tonnes production forecast made by the China Iron & Steel Association on November 19th. The steel group had also predicted a net export of 1.2 million tonnes.

Mr Xu said the government CNY 4 trillion stimulus spending has boosted economic growth and demand for construction steel. Steelmakers are now asking themselves whether demand for construction steel would be good should fixed asset investment slow.

(Sourced from Bloomberg)