Posted on 19 Jul 2021
China Baowu Steel Group (Baowu), already the world’s largest steel producer over 100 million tonnes/year of crude steel capacity, has locked in state-owned Shandong Iron & Steel Group (Shangang), a top steel mill located in East China’s Shandong province, as its next acquisition target among the Chinese steel mills, Shandong Iron & Steel Co, Shangang’s Shanghai-listed arm, disclosed in a release on July 15.
The listed company shared that it had been notified by the parent company on July 14 that Shandong Provincial State-owned Assets Supervision and Administration Commission, the ultimate owner of Shangang, is in discussion with Baowu regarding “a strategic restructuring of Shangang, and this may lead to the change in controlling shareholders and actual controllers”.
This has been the further progress and the first official acknowledgement on the matter since the market speculation on this possible combination since the beginning of this year and the confirmation of the intention from both the parties in January, Mysteel Global noted, though as of now by Thursday, no release was posted by Baowu.
“The acquisition of Shangang will further optimize Baowu’s capacity layout in China,” a Shanghai-based steel analyst commented briefly.
Baowu has been a core force contributing to China’s M&As in the domestic steel industry in recent years and most of its acquisition targets are state-owned enterprises, Mysteel Global noted.
Baowu’s crude steel output totalled 115.3 million tonnes in 2020, or exceeding that of ArcelorMittal to become the world’s top steel mill, according to the ranking of the World Steel Association (WSA) after its series of mergers and acquisitions since December 2016.
Baowu was incorporated towards the end of 2016 as a new entity of the merger between Baosteel Group and Wuhan Iron & Steel Group, and since then it acquired Magang (Group) Holding in June 2019, Taiyuan Iron & Steel Group Co in August 2020, Chongqing Iron & Steel Group in September 2020, and then Kunming Iron & Steel Co in February, Mysteel Global noted.
Usually for Baowu, it tends to pick up “high-quality steel assets” or those mills that can complement its existing capacity layout or steel product structure, according to the analyst, and in the near term, it is unlikely for any profound changes to Shangang’s daily operations, “based on the records of Baowu’s previous M&As”, he added.
An official from Shangang confirmed, disclosing that the Shandong steel mills has been adopting Baowu’s “specialized management” scheme that is to differentiate the management styles according to steel products to optimize the operations, and this is “beneficial to Shangang,” he said.
Shangang, incorporated in 2008 after the merger of Ji’nan Steel and Laiwu Steel, two state-owned steel mills in Shandong, was China’s seventh largest steelmaker in 2020 with crude steel output at 31.1 million tonnes, according to the WSA ranking, producing mainly flats, sections, longs, and specialty steel, and it owns a few iron ore mining operations in the province.
Source:Mysteel Global
