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China to merge two steel makers
By Jianguo Jiang and Helen Yuan (Bloomberg)
Updated: 2005-08-16 07:15
Shares of Bengang Steel Plates, Benxi Steel's listed unit, rose 3
percent to close at 4.51 yuan, or 56 U.S. cents, in Shenzhen. Shares of Angang
New Steel, the listed unit of Anshan Steel, rose 3.3 percent to close at 4.75
Hong Kong dollars, or 61 U.S. cents in Hong Kong.
The combination
would not involve any equity investment, the publicly traded units said Monday
in exchange filings.
Steel mills globally are combining to strengthen
their bargaining power with iron ore suppliers like Vale do Rio Doce, Rio Tinto
Group and BHP Billiton.
Anben Steel will make decisions on new investment
for the units, and will coordinate steel imports and exports, and overseas
purchases of raw materials, Angang said in its statement.
"The merger
will benefit Anshan Steel by eliminating a major competitor in the market of
China's northeastern provinces," said Lin Hai, an analyst at Guotai Asset
Management, based in Shanghai. "But the combination will bring in more redundant
employees to Anshan Steel. Anshan Steel's assets are much better than Benxi
Steel."
The Anben Group could take at least a year to consolidate the
production and marketing businesses of Anshan and Benxi Steel, Sun, at Citic
Frontier, said. Business at the publicly traded Angang and Bengang units was
unlikely to be affected within that period, he said.
"The combination
enables us to share the resources, but the new group will be loosely organized
and the combination won't affect the listed companies in the foreseeable
future," said Jiang Yucong, a spokeswoman at Angang.
Jiang said that
Angang executives, including the deputy general manager, Fu Jihui, would
disclose details of the combination Tuesday at a press conference in Hong
Kong.
Anshan Iron & Steel Group, the second-largest steel
maker in China by output, said Monday that it would merge with a smaller rival,
the biggest move so far in the Chinese government's effort to make its steel
industry more competitive.
Anshan Iron & Steel is combining with
Benxi Iron & Steel Group, the nation's fifth-biggest producer, to form Anben
Steel Group, which will have an annual output of almost 20 million tons.
Shanghai Baosteel Group, the biggest, produced 21 million tons last year.
China, which produces one-third of the world's steel, has been trying to
curb expansion in the industry following a doubling of output in the past four
years which has driven up iron ore and coal prices to record levels, fueling
inflation.
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