China’s Steel Investing Signals No Building Slowdown

Disclosure: This post may contain links, which I may receive compensation at no additional cost to you. Read my disclosure for more information.
Photo Credit:

China's Anshan Iron and Steel Group, a state-owned steel producer, has doubled down with a $175 million investment into a rebar manufacturer in the United States.  The investment in rebar, rather than raw steel, indicates that China sees continuing growth in infrastructure and building development.  This view contrasts strongly to analyst viewpoints of a slowing construction industry.

What $175 Million Buys in America

The $175 million investment buys Anshan a stake in a rebar manufacturing facility still under construction by the Steel Development Company.  The new facility located in Amory, Mississippi will develop rebar to be either purchased or sold to Chinese developers.  As part of the agreement, Anshan also received technology and sales agreements, boosting the firm's US operations and giving it an opportunity for improved foreign trade.

Expanding Its Reach

The investment marks the first time the Anshan company has invested directly in a firm operating in the United States.  Tough political tensions between the United States and China have prohibited large deals in the past.  Recently, the US government decided to label China as a currency manipulator due to the growing trade imbalance between the United States and China.  China, of course, supplies many consumer goods to the United States.

Political Work Needed

Just one month ago the United States imposed another tariff on Chinese imports.  After successfully increasing tariffs on Chinese made tires, the government then acted months later, in April, to add another tariff of 30-99% percent on imports of Chinese steel piping.  The government claims that China has been dumping steel on US soil, using the power of subsidized industry to gain a foothold in the United States.

However, this new investment in the United States could buy Anshan an entry into the US industrial metals sector.  Since the steel is to be made in the United States, albeit by a partially Chinese owned operation, the steel produced will enjoy zero taxes if sold in the United States.  In part due to financial crisis and its own demand internally, Chinese steel imports dipped 60% in 2009, but have since recovered a portion of that margin.