Posted on 27 Jun 2022
China's second-largest steelmaker Anshan Iron & Steel Group, or Angang, is planning to acquire Lingyuan Iron & Steel Group, which will further consolidate the steel industry in northeastern China's Liaoning province.
The move, just 10 months after Angang absorbed Benxi Iron & Steel, will take Angang's annual crude steel output from 55.65 million mt in 2021 to over 61 million mt, accounting for over 6% of China's total steel output.
According to a statement from Shanghai-listed Lingyuan Iron & Steel on June 23, the acquisition is still in the planning stage, and needs approval from relevant government departments.
The two parties, both state-owned, have been in touch for a long time over the acquisition process, so revealing this now indicated the proposal has a good standing chance of success, industry sources said.
It typically takes a lot of stages of planning and approvals to pull off acquisition deals among China's steel behemoths. Angag's acquisition of Benxi Iron & Steel was stalled since 2005 and only got the green light in 2021.
The consolidation move made by Angang marks a second such deal in 2022 in China's steel industry, after Baowu Group took over a majority control of Xinyu Iron & Steel Group in April. Baowu is the world's largest steelmaker.
Baowu is also in the process of taking over state-owned Shandong Iron & Steel Group. With the production from Xinyu and Shandong, Baowu will be able to produce over 160 million mt/year of crude steel, up from the annual output of around 120 million mt in 2021.
With the completion of the Baowu and Angang deals, China's top five steelmakers will account for about 33% of the country's production, up from 29% in 2021, and nearing the target threshold set by the country.
China's Ministry of Industry and Information Technology last year set the target to increase the ratio of the top five steelmakers' crude steel output to China's total output to 40% by 2025.
The consolidation plans are in line with China's decarbonization goals and push for more negotiating power over raw material prices, and such deals have accelerated in the steel industry from 2021.
Some market sources expected the steel industry's merger and acquisition to maintain a healthy pace in the coming years, as rising environmental protection costs and peaked steel demand would force smaller mills to partner with big companies to survive.
Source:Platts
