Wuhan Iron and Steel (600005.SH) and Guangxi Liuzhou Iron and Steel (601003.SH) have terminated cooperation in their joint venture Guangxi Iron and Steel, leaving the former solely in charge of the Fangchenggang steel project. The two sides founded the JV named Guangxi Iron and Steel to develop the Fangchenggang steel project, located in coastal city Fangchenggang of Guangxi Zhuang Autonomous Region, south China.
Under the state approval in May 2012, the Fangchenggang steel project is allowed to have an annual production capacity of 8.5 million tonnes of iron, 9.2 million tonnes of crude steel and 8.6 million tonnes of steel products, with total investments of 63.99 billion yuan. The headquarters of Wuhan Iron and Steel is located in Wuhan city, Hubei province, central China, thus the company has to bear more logistics costs than coastal steelmakers, such as Baosteel (600019.SH).
With the Fangchenggang steel project, Wuhan Iron and Steel aims to reach the Southeast Asian market. During the first half of 2015, Wuhan Iron and Steel saw net profit down 9.81 percent year on year to 522 million yuan, while Liuzhou Iron and Steel incurred a net loss of 632 million yuan, down 415.77 percent on year.
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