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JFE Steel to Acquire Stake in Pancheng Yihong Pipe
07/27/2010 - JFE Steel Corp. has agreed with Pancheng Yihong Pipe Co. to acquire a 24% stake in the Sichuan, China-based processor of high-quality seamless pipes for oilfields, by purchasing newly issued shares. JFE Steel’s 24% share will turn the company into a JFE Steel affiliate under equity-method accounting.
JFE Steel Corp. has agreed with Pancheng Yihong Pipe Co. (PYP) to acquire a 24% stake in the Sichuan, China-based processor of high-quality seamless pipes for oilfields, by purchasing newly issued shares.
PYP is a joint venture originally owned 60% by PanGang Group Chengdu Steel & Vanadium Co., Ltd. (CSST) and 40% by Marubeni-Itochu Steel Inc. As a result of JFE Steel’s capital investment, these ratios will change to 51% for CSST and 25% for Marubeni-Itochu Steel.
JFE Steel’s 24% share will turn the company into a JFE Steel affiliate under equity-method accounting.
PYP threads and sells seamless pipes for oil country tubular goods (OCTG) produced by CSST. Under the new agreement, PYP will be licensed JFEBEAR technology from JFE Steel for all sizes of OCTG with premium thread connections.
Under an ongoing expansion plan that began in 2007, PYP plans to raise its annual capacity of OCTG from 230,000 tonnes at present to 330,000 tonnes at some point in the future.
PYP has also been licensed FOX technology for medium-diameter pipe from JFE Steel. Both technologies are used in severe conditions of deeper oil and gas wells. These connections are used especially in wells over 3000 meters deep and in wells with corrosive conditions by carbon dioxide or hydrogen sulfide.
While supporting PYP’s sales of premium-thread OCTG through technology licensing, JFE Steel will reinforce its package supply capability with JFE Steel’s 13% Chrome OCTG.
