China Securities Journal reported that Hunan Valin Steel is ordered by the Hunan bureau of the China Securities Regulatory Commission to undergo a rectification after its cooperation with ArcelorMittal caused it to lose CNY 857 million in 2010.
As per report, Hunan Valin Steel recently issued a report disclosing that CSRC urged the steel company to carry out reformation, because its foreign shareholder, ArcelorMittal didn’t honor its commitment to provide technical supports for Valin Steel and take in its global purchasing plan.
In June 2008, Valin and its parent group jointly signed a contract with ArcelorMittal to form an automobile steel sheet joint venture and the latter committed to provide the technologies for it.
Valin’s subsidiary, Lianyuan Steel, signed on to supply raw sheets, and later in August that year, its parent group signed another contract with ArcelorMittal to establish an electrical steel joint venture, which signed a purchase agreement with Lianyuan Steel also for 600,000 tonnes of raw sheet metal per year. ArcelorMittal then signed a technology license contract with Lianyuan to provide hot rolling technologies of high grade oriented silicon steel and non oriented silicon steel to Lianyuan.
However, ArcelorMittal failed to execute its commitments through the end of 2009 when Lianyuan’s 2250 hot rolling line built for the cooperation was completed. The hot rolling line then failed to produce high grade value added steel sheets without ArcelorMittal’s technical support and lost CNY 857 million in 2010. Also, ArcelorMittal committed to cover Valin’s global purchase plan and finally failed to execute it again, resulting in CNY 780 million in extra purchasing costs for Valin.
Earlier in 2005, Valin Group signed equity transfer contract with ArcelorMittal which would be the second large shareholder. As the global largest steelmaker, ArcelorMittal aimed to enlarge market shares in China while Valin Steel wanted to obtain ArcelorMittal advanced technology and low cost materials purchasing channel.
(Sourced from National Business Daily and Capitalvue)
