Dongbu Steel and Bao Steel Sign Strategic Alliance

Dongbu Steel, South Korean electric furnace steel maker, announced on Thursday the firm concluded a strategic alliance with Bao Steel, Chinese largest steel maker. This is the second alliance for Dongbu Steel with world largest steel makers such as JFE Steel. For the first phase of the alliance, Dongbu Steel contracted to purchase Bao Steel’s hot rolled steel sheet at 100,000 tonnes per year. Dongbu Steel expects for even wider cooperation in marketing or technical supports by Bao Steel. Dongbu Steel aims to strengthen cost and quality competitiveness through this alliance, when Dongbu Steel started operation of a new integrated hot rolling mill in 2009 and capacity expansion to 10 million tonnes per year.

Mr. Han Guang-Hee, Dongbu Steel’s chairman, and Mr. Ma Guoqiang, Bao Steel’s CEO, singed MOU on Wednesday in Shanghai. Dongbu Steel had procured hot coil from Bao Steel at 30,000 tonnes per month at spot purchase so far, Dongbu Steel’s vice president explained on a phone interview with Japan Metal Bulletin, while the 2 makers concluded a one-year contract this time for stable material supply.

There is no concrete cooperative plan other than the one-year hot coil contract at present, said the vice president. Dongbu Steel aims Bao Steel’s technical supports for steel making and surface treatment.

Dongbu Steel launched a 3-year management plan starting in 2010. The firm targets globalization, specialization and expansion of value-added steel products. Along the plan, the firm will expand its output capacity to approximately 10 million tonnes per year and enhance cost competitive power by technical improvement for electric furnace operation or surface treatment. Dongbu Steel aims to raise the operating margin ratio to 12% in 2012.