Chinese steelmaker Inner Mongolia Baotou Steel Union Co. Ltd. plans to build a joint-venture steel plant with an annual production capacity of 5Mt in Mongolia, according to media reports.

The Chinese steel company has been in close talks with the Mongolian party and if all goes well, the steel plant will be completed in two phases within three years. The planned production capacity of phase-I will be 3Mt/yr.

Mongolia has only one steel plant currently and an annual production capacity of around 300kt, which probably doesn't satisfy demand. In addition, it has had a plan to develop its own mineral resources.

The JV will also involve an iron ore mine and both parties have almost reached an agreement over most of the details and are busy negotiating major elements of the deal, such as the investment proportion per party and management issues.