Posted on 22 Feb 2021
Beijing Jianlong Heavy Industry Group (Jianlong), a privately-owned steel conglomerate headquartered in Beijing experienced in acquisition and restructuring, is tipped to acquire Xingtai Iron & Steel (Xingtai Steel), a leading specialty longs maker based in Xingtai city in North China’s Hebei province, Mysteel Global has learned.
“The Xingtai local government has been striving hard to push the deal, and in discussions, Jianlong has shown its sincerity, so a takeover is highly possible,” a Xingtai Steel official disclosed on Thursday. When this might happen remains unclear, however.
According to local media reports, beginning from February 10 the local government has officially entrusted Jianlong with managing Xingtai Steel’s operations. This it is doing as an external investor, rather than a controlling shareholder, Mysteel Global notes.
“We have been through an internal transformation – from senior management to operations and business structure – all in line with the current model of Jianlong,” the Xingtai official confirmed.
Xingtai Steel, established in 1958, is a leading specialty wire rod producer, capable of producing 18 kinds of specialty wire rods, according to its website. These include cold heading steel, spring steel, bearing steel and tire cord steel for use in auto-manufacturing, bridge and railway construction, machinery manufacturing and maritime and energy engineering.
The company’s works hosts around 3 million tonnes/year of finished steel capacity.
However, Xingtai Steel has suffered from serious financial constraints for the past two years and has lost money, even though the Chinese steel industry overall had performed well, Mysteel Global notes.
“We’ve struggled, mainly because we’ve been unable to produce at our full capacity,” the official explained. “In fact, during the second half of last year, we could only operate at 20% of capacity,” he admitted. A Shanghai-based source close to Xingtai Steel said that for most of last year the company had banked one of its two operational blast furnaces.
Many of the steelmaker’s difficulties stem from the fact that it has not installed the necessary environmental protection equipment mandated by the government, Mysteel Global understands. Xingtai city, in China’s environmentally-sensitive Beijing-Tianjin-Hebei region, has been suffering badly from atmospheric pollution and for years has always ranked among the bottom ten in the environment ministry’s monthly ranking of 168 cities for air quality.
In June 2019, Hebei Industry and Information Technology Department had tabled a plan to move Xingtai Steel out of Xingtai city to a county some 1.5-hours away, in order to separate noisy production activities from quiet downtown residential areas, as Mysteel Global reported. The Hebei government is also trying to relocate polluting industries to suburban areas where the environmental bearing capacity is better.
Although the deadline for Xingtai Steel’s withdrawal from the city was supposed to be 2020, the speciality maker’s poor financial condition caused the move to be delayed. The Xingtai government hopes that with the help of Jianlong, the relocation will take place soon. The two sides held discussions on the relocation on February 14, and Jianlong chairman Zhang Zhixiang is reported to have said his firm will accelerate the pace of Xingtai Steel's upgrading and relocation, as well as increasing investment in Xingtai city.
Jianlong is a steel conglomerate whose businesses cover steel production and mining, shipbuilding and equipment manufacturing. It boasts over 35 million tonnes of crude steel capacity with steelworks in North China’s Hebei, Shanxi and Inner Mongolia, Northeast China’s Heilongjiang and Jilin province and Northwest China’s Ningxia, as well as in Malaysia, according to its company website.
Most of the steelworks were acquired rather than being constructed, such as Xilin Iron & Steel Group in Heilongjiang and Eastern Steel Sdn. Bhd in Terengganu, Malaysia, to name a few.
As for Xingtai Steel, “all of the products it produces are within the package of Jianlong, so operation-wise, it will be easy for Jianlong to absorb it in,” the Shanghai source commented.
Source:Mysteel Global
