China Petroleum and Chemical Corp. (Sinopec), Asia's largest oil refiner, and the Beijing-based steel giant Shougang Group have established a strategic cooperative partnership.

Sinopec will supply Shougang with lube oil now that the country's No. 4 steel maker has agreed to move out of the capital to establish a new plant in the neighboring province of Hebei, said Zhang Jianhua, Sinopec senior vice president.

The two sides signed a cooperation agreement on Monday but Zhang did not elaborate further on the nature of the deal.

"Shougang will have preferential use of Sinopec's lubricating oil products, which will help us replace imported products," said Wang Qinghai, Shougang's general manager.

The two sides agreed to promote cooperation in the petrochemical industry and to form a long-term partnership in sourcing, product research and development, technical information sharing and market expansion, said Wang.

As a flagship enterprise in China's iron and steel industry, Shougang has been vehemently criticized in recent years for polluting the capital city and is considered a handicap in the run-up to the 2008 Beijing Summer Olympics.

In response to the criticism, the company launched an ambitious plan - approved by the State Council - to relocate its polluting plants to Caofeidian, Hebei Province.

The new plant, which was begun this month and is scheduled for completion in 2010, will have a steelmaking capacity of 9.75 million tons. It will be the largest domestic steel plant, according to Wang.

Sinopec, the mainland's second-largest oil and gas producer after PetroChina, reported a net profit of 39.56 billion yuan (4.84 billion U.S. dollars) in 2005, up 22.6 percent over 2004.

However, against a backdrop of falling prices for steel products, Shougang reported a lower net profit of 7.926 million yuan (1 million U.S. dollars) in 2005, down 27.12 percent on 2004.

Source: Xinhua