SHANGHAI Erdos Metallurgy Group Co. Ltd. (EMG), Chinas largest ferrosilicon producer, has purchased a 65-percent stake in Qinghai Wutong (Group) Industry Co. Ltd., increasing its capacity by 250,000 tonnes per year.
"It cost over 400 million yuan ($64.3 million) to buy the stake in Wutong," an EMG executive, who declined to be named, told AMM sister publication Metal Bulletin. "Acquisitions and mergers will become the main trend in industry integration, and Wutong is just the first step of our strategy."
The company plans to acquire other ferrosilicon enterprises with a certain scale, the company executive added, declining to provide additional details.
Qinghai Wutong, one of the countrys major ferrosilicon producers, couldnt be reached for comment.
EMGs existing ferrosilicon capacity stands at 720,000 tonnes per year, a figure that it expects to increase to 1 million tonnes annually by the end of this year or early 2014 after four new furnaces come on-stream.
EMGs capacity following the purchase will be 1.25 million tonnes per year, of which 250,000 tonnes will be from Qinghai Wutong.
Ferrosilicon prices in the domestic spot market have been weak this month after steel mills cut their purchase prices.
Spot prices fell by 100 yuan to 6,300 to 6,350 yuan ($1,013 to $1,021) per tonne March 15 and are expected to fall further on sluggish demand.
Given poor margins, producers and traders said they couldnt cut their export offers and instead are focusing their business in the local market. Mainstream export offers were in a range of $1,430 to $1,450 per tonne f.o.b. China as of March 15, unchanged for the past month.
A version of this article was first published by AMM sister publication Metal Bulletin.