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It marks an important step by the mill to expand overseas amid overcapacity in its home country.
The steelmaker signed a memorandum of understanding towards that with the South African Industrial Development Corp as well as the China-African Development Fund on Wednesday September 10 in Beijing, it confirmed to Steel First.
Hebei Steel decided to establish the plant to take full advantage of its iron ore mine in South Africa, especially in the face of weak iron ore prices and poor domestic steel demand, Yu Yong, Hebei Steel’s chairman, was quoted as saying at the signing ceremony by the People’s Daily.
Hebei Steel took over Rio Tinto’s stake in Palabora Mining Co in July 2013 and now has around 270 million tonnes of high-grade iron ore resources in South Africa.
It will set up a 3-million-tpy long product plant in the first phrase, with construction set to begin in 2015 and commissioning targeted for the end of 2017.
It aims to complete a 2-million-tpy sheet and H-beam plant by 2019 under the second phase, according to the steelmaker.
Domestic overcapacity in China and an increasing number of trade cases against steel imports from the country have led to more Chinese steelmakers considering overseas expansions. Some Chinese mills, including pipe makers, see Africa as an ideal location given its cheap labour, abundant resources and growth potential.
China’s largest steelmaker, Hebei Iron & Steel Group, is planning to set up a 5-million-tpy integrated steel plant in South Africa.