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China to merge two steel makers
By Jianguo Jiang and Helen Yuan (Bloomberg)
Updated: 2005-08-16 07:15
The government plans to shut smaller mills among the 264 steel makers
and force mergers to create two companies big enough to compete with rivals like
Mittal Steel, the National Development and Reform Commission, China's top
economic planning agency, said on July 20.
"It's the biggest merger in
China's steel industry so far. It indicates the consolidation, an inevitable
trend in China's steel industry, is likely to speed up," Sun Zhanjun, an analyst
at Citic Frontier China Research, said in a phone interview from
Shanghai.
The Chinese government hopes that China's top 10 steel makers
will account for half the country's output by 2010 and 70 percent by 2020. The
top 15 steel makers account for 45 percent now. Wuhan Iron & Steel, China's
third-biggest steel maker, said in May that it would acquire Liuzhou Iron &
Steel, a smaller rival in the southern province of Guangxi.
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.
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