Novolipetsk Steel, NLMK (LSE: NLMK), the leading Russian steel producer, announced today that it has entered into an agreement with Tebian Electric Apparatus Stock Co., Ltd (TBEA), the Chinese transformer producer, to create a joint Russian-Chinese service centre to process and sell electrical steels. Whithin the framework of the Second Russian-Chinese economic forum held in Moscow, the agreement was signed by the CEO of NLMK and Chairman of the Board of Directors of TBEA.
According to the companies’ plans, the joint venture “TBEA – NLMK (Shenyang) Metal Product Co. Ltd” will be created in the city of Shenyang, Lyaolin province, China. The joint venture will offer metal processing (cutting of steel coils) and distribution of grain-oriented and non-grain-oriented steel originated from NLMK. In the future, the business activities of the joint venture may expand to include cutting-to-length and production of cores for transformers and electricals.
The agreement signed by the companies lasts for 20 years.
Total investment into the project amounts to USD12 million. Both companies will own a 50% interest in the joint venture. NLMK will finance the acquisition of its interest out of existing cash funds.
The agreement is of strategic value to both parties. NLMK will obtain an opportunity to strengthen its positions in China, the largest and strategically important world market, consuming nearly 30% of the global grain-oriented steel production, while TBEA will receive a stable supplier of the most important material necessary for manufacturing transformers. Both parties expect the project to be highly profitable.
Signing of the agreement was organized under the auspices of RUSTEEL Co, Ltd, a strategic partner of NLMK.
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