China Oriental Group (00581) plans to establish a joint venture with ArcelorMittal

Zhitong Finance App News, China Oriental Group (00581) announced that on October 16, 2024 (after the Hong Kong trading session), the company and ArcelorMittal, the company's main shareholder, concluded: (i) an upstream joint venture agreement, according to which (including) the company and/or ArcelorMittal conditionally agreed to establish an upstream joint venture to engage in the production of hot-rolled substrates and other products jointly decided by the joint venture partners; and (ii) a downstream joint venture agreement, according to which the joint venture partners have The conditions agree to establish a downstream joint venture to engage in the production of new energy soft magnetic material products.

After completing the establishment of the joint venture, the company and ArcelorMittal will each own 50% interest in each joint venture. As of the date of this announcement, the company expects that the joint venture will not become a subsidiary of the company after its establishment, and that its financial results will not be consolidated and recorded as a subsidiary of the company in the group's financial statements.

New energy soft magnetic materials are a soft magnetic material with improved electromagnetic properties. They are core materials for high-end downstream manufacturing in the steel industry, and have been used in core components of power equipment such as automobile motors.

In recent years, the automobile industry has experienced rapid growth in the electric vehicle market and fierce competition in the industry, and automobile manufacturers have invested heavily in the development and production of electric vehicles. It is worth mentioning that ultra-high-end grade or high-end soft magnetic materials have been used to improve power generation efficiency, improve motor performance, and provide customers with a better driving experience. Additionally, in response to regulatory requirements relating to greenhouse gas emissions and growing consumer awareness of climate issues, many car manufacturers have set decarbonization targets for their supply chains.

Under the vision of seizing the huge opportunities brought by these trends, the company and ArcelorMittal have agreed to establish a joint venture to benefit from the low-carbon production of soft magnetic materials in China by entering into a joint venture agreement and agreeing to other arrangements (including but not limited to slab supply framework agreements and technology licensing agreements). The company and ArcelorMittal believe that in accordance with the joint venture agreement and the arrangements discussed above, their long-term investment and continued support for the joint venture can create greater synergy among the joint venture partners in terms of local expertise and international technical knowledge. The Group has accumulated rich experience in the Chinese steel industry, and ArcelorMittal is a well-known global steel manufacturer and one of the few manufacturers with technical knowledge to produce new energy soft magnetic materials. The project is characterized by high-tech, green and digital exploration. Through comprehensive application of the outstanding expertise of joint venture partners and investment in green power projects, the project meets the huge market demand for soft magnetic materials in China. Therefore, it is expected that the joint venture company is in an advantageous position to use the relevant strengths of the joint venture partners to establish a supply chain for new energy soft magnetic material products in China. At the same time, the formation of a joint venture and slab supply framework agreement shows the company's commitment to developing high value-added products in new growth market segments, thereby enhancing the Group's long-term competitiveness and profitability.