China Baowu to invest in aluminum-magnesium alloy company

Yunhai  Metal’s listed company has announced that the companys controller Mei  Xiaoming intends to transfer part of its shares to Baosteel Metal to  which Yunhai will also entrust part of the voting rights. This  transaction is seen by market participants as Baowu intending to expand  its market shares in a new materials sector and strengthen its position  as an automotive sheet supplier, Kallanish notes.

According  to the Yunhai Metal announcement, the control of the company may change  after the completion of this transaction. The purpose of this  transaction is to accelerate the strategic layout of the company and  promote the application of light alloys. A formal agreement has not yet  been signed, and the transaction remains uncertain.

Yunhai  Metal’s main products are aluminium and magnesium alloys, which are  widely used in 3C and automotive industries. Last year, Yunhai Metals  operating revenue was CNY 4.9 billion ($710 million) and its net profit  was CNY 150m. Aluminium alloys account for half of the companys revenue,  and magnesium alloys contribute a quarter. Yunhai Metal signed a  strategic cooperation agreement with BAIC Group last year to jointly  develop aluminium and magnesium alloys for the automotive industry.

Baosteel  Metal is a subsidiary of Baowu Group, which covers metal packaging,  metal products for the automotive trade and services. A Baosteel Metal  representative says that transport sectors such as automotive and  high-speed rail ways are trending towards lightweighting. One of the  ways to achieve this goal is to use new materials such as aluminium and  magnesium to process and produce parts.

Baosteel’s  listed company, another subsidiary of Baowu, said last week that the  company is actively tracking the automotive aluminium industry and  intends to enter it at some stage. This action is intended to meet the  needs of automotive customers for aluminium applications. Baosteel  listed is Chinas largest supplier of automotive steel sheets, accounting  for more than half of the market, according to the companys data on the  Shanghai Stock Exchange.