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China steel-mill merger signals bid for more U.S. plant sourcing

A three-company merger in China’s 1,000-strong industry signals increased competition for orders from North American automakers, according to experts at the American Iron and Steel Institute.

As the world’s largest producer and consumer of steel, China has grown in its capacity and the Beijing government has spurred steel makers to consolidate. The three firms which agreed to unite are among the industry’s largest.

The three firms, all located in North China’s Hebei Province, include Tangshan-based Tangshan Iron & Steel, Chengde Xinxin Vanadium & Titanium Co. and Handan Iron & Steel Co.

Raw material and research costs are likely to be increased as an offshoot of the merger, says a spokesman for the newly-formed Hebei Iron & Steel Group, which was created by the Tangshan and Handan mills in June before the merger was put together.

In November, Chinese crude steel output declined 12.4 percent from a year earlier, to 35.2 million metric tons. But Xinhua News Agency has reported that China is raising its production target for 2009 and is planning to raise its output to 41 million tons of steel and 30 million tons of iron.

China’s largest steel mill, Baoshan Iron & Steel, produced 22.6 million tons of steel in 2007.

The Chinese government has voiced concern about steel price wars as a deterrent to more efficient production processes and a potential brake on anti-pollution efforts.

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