Update | Baoshan, Wuhan to merge to create world’s second-largest steel producer
The merger kick-starts President Xi Jinping’s so-called supply-side reform programme to consolidate excess capacity in steel
China’s State Council has given the green light to merge two of the country’s largest steel mills to create what could become the world’s second-largest producer, kick-starting president Xi Jinping’s programme to consolidate excess production capacity into fewer, larger groups.
Baoshan Iron & Steel Co., the listed unit of China’s second-biggest steel producer, will swap shares with Wuhan Iron & Steel Co., the number six steelmaker, according to Wuhan’s press statement.
The combined steel company will be called China Bao-Wu Steel Group, according to the statement.
Details of the restructuring are still being discussed.
The merger will create a steelmaker with the combined capacity to produce more than 70 million tonnes of the alloy every year, second only to ArcelorMittal SA’s capacity of 114 million tonnes, according to the World Steel Association.
“It marks the first step taken by the Chinese steel majors to curb the overcapacity of the industry, and we may see more industry-wide consolidation among smaller players going forward,” said CLSA’s head of China industrial research Alexious Lee.