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Baosteel Negotiating to Buy US$1-billion Stake in Amsteel Mills: Sources

Source: Bloomberg

Baosteel Group Corp, China’s second-biggest steelmaker, is in talks to buy a stake in a steel unit of Malaysia’s Lion Group for about US$1 billion, said two people with knowledge of the matter.

The size of the holding in Amsteel Mills Bhd to be sold has yet to be determined, one of the people said, declining to be identified because the negotiations are private.

Steel demand in China, the world’s biggest consumer of the alloy, may rise by as much as a quarter by 2015 compared with last year, according to a May projection from the China Iron & Steel Association, which represents producers.

China has been encouraging state-owned steelmakers to invest in overseas resources to reduce their dependence on Vale SA, Rio Tinto Group and BHP Billiton Ltd, the world’s three biggest suppliers of iron ore.

Meng Haibiao, a media relations official at Baosteel, declined to comment. Lion Group Chairman William Cheng was not immediately available when phoned at his office in Kuala Lumpur Wednesday.

Baosteel, supplier of half the sheets used by carmakers in China, will consider building plants in developing regions outside the country, Chairman Xu Lejiang said in March. The Chinese government is encouraging a shift of surplus steel production capacity overseas, Wuhan Iron & Steel Group General Manager Deng Qilin said the same month.