A new Joint Venture will team up China’s largest pipe manufacturer and Saudi Arabia’s AHQ, which operates the third-largest coating factory in the world.
Panyu Chu Kong Steel Pipe Co. Ltd. signed an agreement June 13 with Abdel Hadi Abdullah Al Qahtani & Sons Co. (AHQ) to establish a JV company with a total capital of $106 million US.
AHQ will own 50% of the new company; the other half will be owned by Chu Kong Petroleum and Natural Gas Steel Pipe Holdings Limited (Chu Kong Pipe), Panyu Chu Kong’s parent company and China’s largest manufacturer of longitudinal submerged arc welded pipe (LSAW).
550,000 Tons of Pipe
The venture will manufacture and sell LSAW steel pipe and Electric Resistance Welded (ERW) steel pipe. Pursuant to the agreement, the JV company will set up two mills in two phases: an LSAW plant designed to produce about 330,000 tons of pipe annually and an ERW plant designed to produce about 220,000 tons of pipe annually.
|AHQ built its Al-Qahtani Pipe Coating Terminal in 1954. Today, the company has three coating plants in Saudi Arabia.|
Saudi-owned AHQ supplies materials, equipment and services to Saudi Aramco, Saudi Consolidated Electric Company, Saudi Basic Industries Corporation, Saline Water Conversion Corporation and many other government agencies, as well as the private sector.
AHQ operates the third largest coating factory in the world.
Filling a Market Gap
Chen Chang, chairman of Chu Kong Pipe and its subsidiaries (“the Group”), said the venture would be the first in the Saudi Aramco region to provide LSAW steel pipe locally, “therefore effectively filling a large gap in the requirements of the market.”
“2011 is a year that global infrastructure projects are picking up their pace of development, and the demand of international steel pipe market has been on the rise since the end of last year,” said Chang.
The JV will increase the Group's production capacity and market shares in Saudi Arabia and other neighboring countries, while creating an “enormous synergy effect,” Chang said.
Establishing regional production plants near customers and prospective clients will reduce delivery costs, and enable the company to leverage its current R&D capabilities, management and client base, he said.
“We are well positioned to excel in [the] steel pipe market, to expedite business performance, and create value for shareholders,” he said.