China's HBIS Group Co Ltd announced plans to partner with South Korean steel giant POSCO to form a new joint venture company. The joint venture, which will be based in China, will be established to develop and produce high-end steel products for automotive use.
The collaboration between one of China's largest steel producers and South Korea's largest steel company is meant to take advantage of opportunities in China's auto markets. While there has been a slight the slump in the country's auto industry, both companies still believe that setting up a joint venture to address future demands will eventually pay off.
The new joint venture is expected to be based in Tangshan, located in China's northern Hebei province. The exact location of the new company could still change as the subject is reportedly still being discussed. Tangshan is, however, one of the top choices as it is in proximity to HBIS's Lasting cold rolling steel project.
To begin the process of establishing the joint venture, both companies had already signed a memorandum of understanding. Under the memorandum, both companies are aiming to leverage each other's resources to produce products for the high-end automotive market. Other details of the project, including investment ratios, expenses, and profit-sharing is reportedly still under discussion.
Industry experts have pointed out that partnering with HBIS was a the strategic move by POSCO and will likely be a win-win situation for both companies. By forming a partnership with an established player, POSCO should be able to rapidly gain market share in what is currently the largest steel market in the world.
At the same time, HBIS has much to gain from gaining advanced technologies from foreign steelmakers, which it can use to enhance its current products and operations. Analysts have pointed out that Chinese the steelmaker has made substantial progress over the years and are now able to compete with overseas players in producing high-end steel products.
HBIS mentioned in a statement that the planned cooperation in the auto steel project should enable both companies to greatly enhance their competitiveness. Since the start of 2019, both companies had apparently engaged in multi-level technical and commercial discussions with the hopes of establishing the joint venture. After the preliminary discussions were concluded, both companies had expressed their intentions to collaborate at the capital level.
HBIS further pointed out that both companies do already a long-standing cooperative relationship with each other. In 2017, both companies had established a comprehensive cooperation partnership that included collaboration in key areas such as advanced technologies, raw materials, planning, and environmental cooperation.
