Iron and steel industry ushered in 'era of big steel enterprises'

On June 2, 2019, the "boots" of China Baowu Iron and Steel Group Co., Ltd. merging Ma Steel (Group) Holding Co., Ltd. finally came to the ground. On the same day, Maanshan Iron and Steel Co. issued an evening announcement saying that China Baowu restructured Maanshan Iron and Steel Group, and Anhui SASAC transferred 51% of the shares of Maanshan Iron and Steel Group to China Baowu free of charge. After the acquisition of Maanshan Iron and Steel Group by China Baowu, as a holding company, we have changed from provincial state-owned enterprises to central enterprises, which has enhanced our ability to resist market risks, which is good for us. Maanshan Iron and Steel Co., Ltd. told China Business News that after the acquisition of Maanshan Iron and Steel Group by China Baowu, it indirectly controlled 45.54% of Maanshan Iron and Steel Co., and became the indirect controlling shareholder of Maanshan Iron and Steel Co. The controlling person of Maanshan Iron and Steel Co. was changed to SASASAC of the State Council. However, the direct shareholder remained unchanged and remained as Maanshan Iron and Steel Group. It is understood that after the acquisition of Maanshan Iron and Steel Group by Baowu, the assets will exceed 800 billion yuan, and the crude steel production capacity is expected to approach 100 million tons in the future. In response, Bo Lin told reporters that the merger and reorganization of steel enterprises is the development trend of the industry. Over 100 million tons of backward production capacity has been eliminated by means of marketization and legalization in recent two years, which has laid the foundation for the merger and reorganization of steel enterprises. Bo Lin judges that in the future, iron and steel enterprises will enter the era of "big steel enterprises", and ten or so large steel enterprises will be formed to compete for the international market. According to the announcement of Maanshan Iron and Steel Co., Ltd., China Baowu restructured Maanshan Iron and Steel Group, and Anhui SASASAC transferred 51% of the shares of Maanshan Iron and Steel Group to China Baowu gratuitously. Through this acquisition, Baowu will directly hold 51% of the shares of Maanshan Iron and Steel Group, indirectly control 45.54% of the shares of Maanshan Iron and Steel Group, and become an indirect controlling shareholder of Maanshan Iron and Steel Group.

"The acquisition of Maanshan Iron and Steel Company has been circulated in the industry for a long time, this time the dust settled down." A Chinese Baowu management told reporters that after the merger of Baosteel Group and WISCO Group, a document of China Baowu Development Plan (2016-2021) showed that China Baowu Iron and Steel's production capacity would be increased to 80 million tons to 100 million tons between 2019 and 2021. After the acquisition of Maanshan Iron and Steel Group, the production capacity will exceed 80 million tons, but there is still a distance from 100 million tons, that is to say, it does not rule out the future acquisition of some capacity.

Public data show that Baowu, China is a combination of Baosteel Group and WISCO Group. Before the merger, that is, in 2015, Baosteel Group's crude steel output was 34938,000 tons, second only to Hegang Group, ranking second in the country; WISCO Group's output was 25776,000 tons, ranking sixth in the country. After the merger, China's Baowu output exceeded 60.714 million tons, closely following the world's number one AncelorMittal, which produced 97.136 million tons of crude steel in 2015.

China Baowu and Ma Steel Group belong to large-scale iron and steel groups with a tonnage of more than 10 million tons. Relevant data show that in 2018, the crude steel output of Baowu and Maanshan Iron and Steel Group of China reached 67.4294 million tons and 196.19 million tons respectively, totaling 87.07.13 million tons. This means that with further increments in capacity, it will be able to keep pace with Salem Mittal. However, it is noteworthy that the data of 97.136 million tons is the crude steel output of AncelorMittal in 2015, which has also made acquisitions of steel production capacity in recent years. Among them, the latest acquisition was in September 2018, when ArcelorMittal raised its bid price to 420 billion rupees ($5.83 billion), which was higher than that of its rival Numetal, a unit of VTB Group in Russia, at 370 billion rupees ($5.14 billion). According to public information, ArcelorMittal currently produces 130 million tons of steel, accounting for about 10% of the world's steel production.

"In the iron and steel industry, the bigger the iron and steel industry, the more power of voice, the more money, such as China Baowu is currently the most profitable iron and steel enterprises in China." Zhang Qiang, a person in charge of a large steel enterprise in Northwest China, told reporters that by the end of 2018, China's Baowu had a total output value of 711.8 billion yuan and a net asset of 360.8 billion yuan. In 2018, it achieved 439.8 billion yuan in business income and a net profit of 33.8 billion yuan, which is beyond comparison with other domestic steel enterprises.

"Following AncelorMittal, the first in the world of iron and steel, the merger of Baowu and Maanshan Iron and Steel Company in China not only improves the steel production capacity, but also enhances the international competitiveness of Baowu, which is also in line with the action policy formulated by the central government to make the central enterprises bigger and stronger." That's what the head of the steel enterprise said. 

In 2016, with the approval of the State Council, Baosteel and WISCO carried out joint restructuring, established Baowu China, built a world-class technological innovation, industrial investment and capital operation platform in the field of iron and steel, and formed a super-large iron and steel enterprise group with strong competitiveness. Now it seems that the merger between Baosteel and WISCO is successful. In fact, the merger and reorganization of steel enterprises has been mentioned many times. As early as 2017, when the National Development and Reform Commission put forward the implementation plan of coal production capacity removal, some insiders pointed out that the merger and reorganization of iron and steel industry is more powerful than that of coal industry.

In accordance with the requirements of the "Regulation and Upgrading Plan for Iron and Steel Industry (2016-2020)" (hereinafter referred to as the "Plan"), and based on the existing leading enterprises to implement integration and promote the construction of national technological innovation demonstration iron and steel enterprises, support the construction of a new national industrial demonstration base with iron and steel as the leading industry.