By Jin Jing (China Daily)
Updated: 2007-09-07 09:00

Baosteel Co Ltd yesterday said it approved a proposal by its parent company Baosteel Group to set up a joint venture with Handan Iron & Steel Group to invest in a steel project in Hebei Province that is expected to have an annual steel output of 4.6 million tons.

Baosteel Co also said it reserved the right to buy its parent company's stake in the joint venture, according to the company's statement to the Shanghai Stock Exchange. Baosteel shares jumped 2.35 percent to close at 19.57 yuan yesterday.

The 50-50 joint venture, with registered capital of 12 billion yuan, was proposed in May.

The Hebei steel project was started in February last year, with a total outlay of 19.4 billion yuan. The first phase is expected to be completed in 2008 and the second phase by 2010.

"Baosteel Co will consider whether to invest in the project after it begins production," Chen Ying, board secretary of Baosteel Co, told China Daily yesterday.

Liu Yanqi, an analyst at Haitong Securities, said: "Baosteel has enough capital and technology to develop the project but market risks, including changes in fixed-assets investment and other macroeconomic policies may have a negative impact on the project."