Posted on 24 Nov 2020
Year 2020 will be an unforgettable year in many aspects, and as for the global steel market, it is a year of investments and divestments, as while Tata Steel has been busy divesting from its steel assets outside India, China Baowu Steel Group (Baowu), China’s top steelmaker, has been intent on becoming the world’s top and marching towards its 100 million tonnes/year milestone via mergers and acquisitions.
After a couple of major mergers in 2020 at zero costs, Baowu has expanded into a 110 million t/y steel conglomerate, but it has not been contented with what it has achieved, but has been busy mulling how to enhance its competitiveness and to realize the real consolidation by checking inside the organization to looking for internal optimization opportunities.
The latest renaming one of its key steelworks in South China’s Guangdong province Guangdong - Shaoguan Iron & Steel Co (Shaogang) – on November 20, may just well be a typical case to illustrate the Chinese steel giant’s efforts on how to enhance its inner strength.
Shaogang, Baowu’s 6.6 million t/y steelworks producing both carbon and special steel including stainless put up an announcement via its Shenzhen-listed arm on November 20, disclosing that it has been granted a new name by the group as Central South China Iron & Steel Co (literal translation) or Zhongnan (in pinyin) Steel.
A Zhongnan Steel official explained on the phone to Mysteel Global that the new name may be related to Baowu’s future development strategy as a state-owned company, but he declined elaborating, only saying further announcements will be disclosing more details.
China’s market sources have interpreted the move as a sign for Baowu to roll out its regional steel asset integration inside China after the series of takeovers to have exceeded its target in volume.
“When it is expanding the size via mergers and acquisitions of the Chinese steel mills, it is also looking into setting up some regional centers to better and more efficiently manage all these steel assets,” Xu Xiangchun, Mysteel’s senior analyst from Beijing office, commented.
Zhongnan Steel could well be a center for Baowu to manage its steel subsidiaries in Central and South China and to look for new acquisition targets in these regions, Xu shared the market speculation.
Kunming Iron & Steel Co in Southwest China’s Yunnan and Liuzhou Iron & Steel Group in Guangxi, also Southwest China, have been speculated as Baowu’s next targets, he shared.
Besides, all the regional managing headquarters will also have their own niche products to differentiate from one another, thus avoiding unnecessary internal competition and at the same time better serving their regional customers’ needs, according to Xu.
As for steel products, Zhongnan Steel might be operating Baowu’s commercial-grade carbon steel and stainless steel, Mysteel Steel noted, as South China has been renowned as one of two core stainless trading hubs in China.
“Baowu’s internal and regional integration will synchronize with its pace of mergers and acquisitions,” a Singapore-based senior analyst commented, as Baowu has appeared always been clear-minded with its development strategy, and the expansion simply in capacity has not been what Baowu has been after with all the efforts in mergers and acquisitions, she noted.
Over a decade of mergers and acquisition, starting with the takeover of Xinjiang Bayi Iron & Steel in 2007, Baowu has now had its steel assets spanning North to South, West to East of China with auto sheet, electrical steel, stainless, and commercial-grade long and flat steel as its core products, and the reality does call for a reshuffling and reorganization for Baowu to achieve a sustainable, efficient and orderly development in the long run.
Written by Olivia Zhang, zhangwd@mysteel.com, and Hongmei Li, li.hongmei@mysteel.com
Source:Mysteel Global
