CSC ties up with Sumitomo to set up East Asia Steel Corp.

Taipei, May 15, 2003 (CENS)--The state-run China Steel Corp. (CSC), Taiwan's largest steel producer of steel, yesterday signed a contract with Sumitomo Metal Industries Ltd. Of Japan to form a joint-venture firm, East Asia Steel Corp., in Tokyo.

The contract-signing ceremony was attended by CSC chairman Lin Wen-yuan, vice president of sales T.H. Chen, vice president of planning C.C. Chen, and Yieh Loong Steel Corp. chairman Lin Kao-huang.

The new venture will operate a steel plant owned by Sumitomo in Wakayama near Osaka. CSC will procure 600,000 metric tons of steel billets per year from the new company in the initial stage and gradually increase the procurement amount to 1.8 million metric tons in 2005.

Lin said his company will cooperate with Sumitomo Metal to form an NT$10 billion (US$288.18 million at US$1:NT$34.7) joint-venture company responsible for exporting semi-finished iron and steel, such as steel billets, to Taiwan. CSC will hold a 30% stake in the new company.

CSC said this would be its second cooperative venture with a well-known Japanese steel firm following a previous alliance with Maruichi Steel Tube Ltd. CSC said that the cooperation with these Japanese firms would help stabilize the domestic iron and steel market, which has been volatile over the past several months.

The cooperation with Sumitomo Metal was mapped out by former CSC chairman Y.T. Kuo. After a year of negotiations, CSC and Sumitomo have eliminated difference in export prices and entered the contract-signing stage.

Over the past year when CSC was negotiating with Sumitomo, both sides signed a one-year supply contract, under which Sumitomo supplied 600,000 metric ton of steel billets to CSC affiliate Yieh Loong Steel Corp. in July last year.

CSC said with the formation of the joint-venture firm, Sumitomo would increase its supply by 100,000 to 300,000 metric tons per year.

Yieh Loong, which specializes in the production of hot-rolled and cold-rolled steel pipes, uses two million to 2.4 million metric tons of steel billets per year. About 600,000 metric tons of the billets are supplied by CSC and the remainder is imported from Japan, mainland China, Russia and other countries.

CSC said the formation of East Asia Steel would help stabilize the supply of steel billets and improve Yieh Loong's operations.