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REUTERS[ TUESDAY, AUGUST 16, 2005 01:32:04 AM ]
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SHANGHAI: China's number-two steel maker, Angang, has merged with the fifth-largest, Bengang, to create a leader in the world's top steel market, as Beijing struggles to overhaul a glutted sector and foster globally competitive firms.
The move could create a steel giant with an annual capacity of 30 million tonnes — equivalent to South Korea's Posco, the world's fifth-ranked steel firm or China's current leader Baosteel Group, which controls listed Baoshan Iron and Steel Co.
The merger of the mills marks a breakthrough after well over a year of difficult negotiations, as local governments fretted about layoffs and plant closures. The merger involved no equity or cash in initial stage, though it might eventually. If it goes smoothly, it will set a precedent for consolidating China's 800 steel mills, many of which have resisted Beijing's call to merge or shut.
"Consolidation will help key Chinese firms, like new Anben Steel and Baosteel, enhance their ability to compete with world-class conglomerates such as Posco," said Liang.
Mingchao at Tianxiang Investment Consulting Co, China's first steel industry development blueprint, released last month, foresees two industry giants with an annual capacity of more than 30 million tonnes by 2010, suggesting Baosteel and the newly formed company might be frontrunners. It calls for the country's 10 largest mills to produce half of the nation's steel output by 2010 and 70% by 2020.
"Mergers and acquisitions over three to five years could centre around the third-largest player, the parent of Wuhan Iron and Steel Co Ltd in central China, and the leading mill in southwestern China, the parent of Panzhihua Steel Co," said an analyst.
Ending the dominance of smaller mills in domestic markets would give China more leverage in negotiations with raw materials suppliers, such as iron ore miners CVRD of Brazil and Australia's BHP Billiton. "Beijing has realised China's large uncoordinated purchases are driving up raw materials prices worldwide, and that's become a problem for the Chinese industry," said analyst Michael Komesaroff of Urandaline Investments.
REUTERS[ TUESDAY, AUGUST 16, 2005 01:32:04 AM ]
Citibank NRI Offer
SHANGHAI: China's number-two steel maker, Angang, has merged with the fifth-largest, Bengang, to create a leader in the world's top steel market, as Beijing struggles to overhaul a glutted sector and foster globally competitive firms.
The move could create a steel giant with an annual capacity of 30 million tonnes — equivalent to South Korea's Posco, the world's fifth-ranked steel firm or China's current leader Baosteel Group, which controls listed Baoshan Iron and Steel Co.
The merger of the mills marks a breakthrough after well over a year of difficult negotiations, as local governments fretted about layoffs and plant closures. The merger involved no equity or cash in initial stage, though it might eventually. If it goes smoothly, it will set a precedent for consolidating China's 800 steel mills, many of which have resisted Beijing's call to merge or shut.
"Consolidation will help key Chinese firms, like new Anben Steel and Baosteel, enhance their ability to compete with world-class conglomerates such as Posco," said Liang.
Mingchao at Tianxiang Investment Consulting Co, China's first steel industry development blueprint, released last month, foresees two industry giants with an annual capacity of more than 30 million tonnes by 2010, suggesting Baosteel and the newly formed company might be frontrunners. It calls for the country's 10 largest mills to produce half of the nation's steel output by 2010 and 70% by 2020.
"Mergers and acquisitions over three to five years could centre around the third-largest player, the parent of Wuhan Iron and Steel Co Ltd in central China, and the leading mill in southwestern China, the parent of Panzhihua Steel Co," said an analyst.
Ending the dominance of smaller mills in domestic markets would give China more leverage in negotiations with raw materials suppliers, such as iron ore miners CVRD of Brazil and Australia's BHP Billiton. "Beijing has realised China's large uncoordinated purchases are driving up raw materials prices worldwide, and that's become a problem for the Chinese industry," said analyst Michael Komesaroff of Urandaline Investments.