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Two Chinese Steelmakers Explore Mega-Merger
06/27/2016 - Baosteel Group Corp. and Wuhan Iron & Steel Group Corp., two of China’s largest steelmakers, are considering a merger, potentially creating a company that could rival No. 1 ArcelorMittal SA, according to reports.
In separate statements, the companies said they are planning a “strategic restructuring” with each other and that an update on progress would be issued within five working days, the South China Morning Post reported.
“The proposals have not been decided and would require approval from relevant authorities once they are confirmed,” the companies wrote in filings to Shanghai’s stock exchange, the newspaper said.
The two companies together produced nearly 61 million metric tons of steel in 2015, according to the World Steel Association. And as of Friday’s close, they had a combined market value of US$16.3 billion, according to the Bloomberg news service.
Bloomberg said the discussions highlight China’s efforts to re-engineer its state-run industrial sector. In fact, the chairman of China’s National Development and Reform Commission, its top economic planner, on Sunday said the country will cut 45 million metric tons of steelmaking capacity and 280 million metric tons of coal capacity this year, according to the Reuters news service.
China already has promised to cut between 100 million and 150 million metric tons of capacity over the next five years.
“The merger of Baosteel and Wuhan Steel fits with the government strategy of improving efficiency and reducing competition and overcapacity,” Xu Xiangchun, the chief analyst at the Mysteel Research consultancy, told Bloomberg.
“With these two leading the effort there might be more mergers ahead.”
