Lawmakers Question Anshan Investment

July 19, 2010
Concerns include technology and national security risks.

Opposition to China's Anshan Iron & Steel Group's efforts to enter the U.S. steel industry increased in early July, with 50 members of the Congressional Steel Caucus adding their concerns to the chorus.

"As you may know, Anshan is China's fourth-largest steel producer and the product of massive Chinese government subsidies. We believe that this investment allows the full force and financing of the Chinese government to exploit the American steel market from American soil," wrote the lawmakers in a July 2 letter to Treasury Secretary Tim Geithner.

The investment in question is Anshan Iron & Steel Group's plans, announced in mid-May, to invest in up to five U.S. production mills through a deal with Amory, Miss.-based Steel Development Co. The initial investment is in a $175 million steel rebar plant in Amory.

The lawmakers suggested the deal may pose national security risks, as well. "For example, Anshan could have access to new steel production technologies and information regarding American national security infrastructure projects," the letter stated, pointing out that full details of the transaction have not been released.

The letter from the Congressional Steel Caucus follows one delivered by the Steel Manufacturers Association President Thomas A. Danjczek to Commerce Secretary Gary Locke and U.S. Trade Ambassador Ron Kirk shortly after the Anshan announcement. "It is clear that this investment by the Chinese government is based on political strategic considerations, rather than valid market-based principles," the letter said in part.

Privately held Steel Development Co. had remained largely quiet about the Anshan investment, although "due to unfounded concern regarding controlling interests in our company," it recently issued a statement saying in part that Anshan contributed less than 20% of the total investment in Steel Development.

The statement also made pointed reference to the number of jobs (1,200 construction and 100 permanent) the initial plant would create as well as the size of the project.

"With Steel Development projecting production of 350,000 tons of rebar per year in a 120 million ton steel market (less than three-tenths of 1 percent), the promotion of national security
fears due to the Anshan investment is, at best, difficult to rationalize," the statement read.

The lawmakers representing the Congressional Steel Caucus have requested the Treasury Department to thoroughly investigate the details of the investment "to ensure that American steel is able to continue to keep our country safe and our economy strong."

The American Iron and Steel Institute has applauded the lawmakers' letter. "Given the economic and national security issues raised by a Chinese government investment in a U.S. steel company, this matter certainly deserves very careful and thorough review by the appropriate U.S. authorities," said AISI President and CEO Thomas J. Gibson in a statement.

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