Shougang Asset Replacement Plan Dystocia

In December 24th, Shougang Group (000959.SZ) issued a regular announcement of asset restructuring.

The company's stock has been suspended for nearly 2 months since October 29th.

According to the plan of Beijing municipal government, Shougang Group will shut down the main process of steel in Beijing Shijingshan District by the end of 2010, and the equipment that will stop the production will be set up by the Capital Steel Company through asset replacement or acquisition.

At present, the time limit for making a commitment to stop production is less than a few days, but the capital replacement plan of Shougang Group has not yet been introduced.

Recently, a person close to Shougang Group told reporters that the planned dystocia was mainly due to the wholly-owned subsidiary of Shougang Group, which is considered to be the most likely to be put into Shougang Group's Shougang Qian'an iron and Steel Co. Ltd. (referred to as moving steel), which is facing the problem of legalization of steel production capacity.

Moving steel is located in Tangshan City, Hebei province. In 2002, it was invested and built by Shougang General Corporation and Qian'an key project construction company. The annual design capacity is 8 million 500 thousand tons.

By the end of 2009, Shougang Qian'an company had a total assets of 32 billion 90 million yuan and a net assets of 5 billion 600 million yuan.

According to the public reports of the previous media, although the relocation of the steel project started very early, it has not received the "quasi birth certificate" of the national development and Reform Commission.

Previously, according to the reporter's understanding, Shougang head office and relocation steel are in frequent contact with the NDRC, and there are rumors that the NDRC will discuss the legalization of production capacity of Shougang moving steel project.

"At present, there are more than 700 million tons of crude steel production capacity in China, and the capacity of" black households "without the national production license has more than 300 million tons. In the context of serious excess capacity of iron and steel, the government is making great efforts to eliminate backward production capacity. It is not an easy task to wash the white households' identity and install them into the listed companies.

An industry insider told reporters.

Obviously, the legalization of the production capacity of the steel has increased the difficulty of the replacement plan of Shougang.

And in December 16th, the general manager of Kailuan Group, such as the Kailuan Group, said that Kailuan Group was willing to accept the shares held by Hebei iron and steel company in Caofeidian Shougang Jingtang Steel Corp, adding another variable to the capital reorganization of Shougang Group.

Shougang Jingtang company was first established in October 2005. It was jointly sponsored by Shougang General Corporation and Tangshan iron and steel Refco Group Ltd (hereinafter referred to as Tang Gang). Among them, Shougang Group owns 51% and Tang Gang owns 49%. At present, Tang Gang belongs to Hebei iron and steel group.

Once the Hebei iron and Steel Company quit the Shougang Jingtang company, the Capital Steel Company of Shougang will be injected into Shougang Group's assets and will become one of the alternatives.

At present, Shougang Jingtang project is still under construction stage. The design of the project is 8 million 980 thousand tons of iron per year, 9 million 700 thousand tons of steel and 9 million 130 thousand tons of steel.

The first phase project was put into operation in September 2010.