A Korea-Japan-China Steel Alliance?

There are stirrings of a steel industry alliance between Korea, China and Japan.

Xie Qihua, the chairwoman of China’s biggest steel company, Baogang Group, had an interview in Osaka on November 29 with Nihon Keizai Shimbun and revealed that she will ask for investment from Nippon Steel and POSCO.

Baogang Group is currently working together with Nippon Steel in Shanghai to jointly produce steel plates for cars, and is considering the possibility of enlarging their facilities.

In regards to the foreign stock listing that Baogang Group has worked on, Xie said, “It will be possible to mutually posses stocks of Nippon Steel and POSCO.” At the moment, Baoshan Iron and Steel, which is listed under the Baogang Group, is listed on the Shanghai Stock Exchange, but foreign companies are restricted from obtaining shares.

Nihon Keizai Shimbun reported that Nippon Steel is likely to accept Baogang Group’s request as it is looking to strengthen its joint operations with big foreign businesses in preparation for a reorganization of the world steel industry. Nippon Steel and POSCO have already begun strengthening their united front with an agreement to expand cooperation on funds and business operations between the two companies.

Currently, Nippon Steel owns 3.32% of POSCO shares and has purchased an additional 2%, while POSCO which has 2.17% of Nippon Steel shares, has agreed to buy more in an amount that corresponds to the amount of money that Nippon Steel has invested.

The reason that Asia’s steel giants have been actively looking for ways to join together is because the world’s biggest and second biggest steel companies, Mittal Steel and Arcelor, have declared that they will merge, which brings up the threat of hostile merger and acquisition attempts in the future.

iam@donga.com