Beijing taps private mills to aid steel-sector reform

Posted on 29 November 2021

Lv Guixin, a senior official with China's Ministry of Industry and Information Technology (MIIT) has told a recent event hosted by the China Chamber of Commerce for Metallurgical Enterprises (CCCME) that China's privately-owned steel producers "play an increasingly important role"in the steel industry's development. This public recognition of their importance, delivered to a grouping of China's largest and most influential privately-owned steelmakers, is seen by some as Beijing's appeal that private firms keep helping public mills.


Certainly, the private mills are more than carrying their weight, with the CCCME revealing at the event on November 23 that over January-September, Chinese privately-owned steelmakers produced 507 million tonnes of crude steel, or around 63% of the national total.  

Over January-September, these private steel companies' profits totaled Yuan 206 billion ($32.2 billion), up 99% on year, showing "the comprehensive competitiveness of privately-owned steelmakers are increasing", CCCME stated.

Speaking at the event on November 23, Lv was wholesome in his praise, saying that "privately-owned steel companies are an indispensable and important force that promoted our steel industry to evolve from small to large and from weak to strong."

Lv noted that to hasten the development of the nation's steel sector in the next five years, privately-owned steel mills must continue to control steel output, improve product quality and promote low-carbon and smart steelmaking. More significantly, Lv said he encouraged those "competitive, privately-owned steelmakers" to strengthen efforts in improving industrial concentration.

Though Lv made no direct reference to the on-going restructuring of China's iron and steel sector and the role that private mills are playing as strategic partners in state-owned steel enterprises, it is clear that MIIT would like to see more private mills invest their expertise - as well as funds - in struggling SOE mills.

Only last Wednesday, Anyang Iron & Steel Group (Angang), a major state-owned steelmaker in Central China's Henan, announced that it was proceeding with its 'mixed-ownership reform' and was hoping that Shagang Group (Shagang) - China's largest privately-owned steel producer - would become a strategic investor, as reported.

Angang's launch of mixed-ownership reform is to "change (its system and mechanism), bring in innovation and vigor and promote integration, upgrading and 'high-quality' development of the steel industry in Henan," Anyang Steel stated in its announcement.

In Lv's view, Shagang exemplifies the private-sector dynamism China's steel industry will need if it is to achieve the central government's goal of lifting industry concentration to 60% by 2025 from 39.2% as of 2020.  In his address to the CCCME, Lv pointed out that Shagang had acquired state-owned specialty steelmaker Dongbei Special Steel Group in Northeast China.

Lv also noted that its active pursuit of M&A opportunities over the recent years had helped Jianlong Group, the Beijing-headquartered steel conglomerate, to grow into a 42 million tonnes/year steelmaker. Among Jianlong's acquisitions were most major steelmakers in Northeast China's Heilongjiang province and more recently, the takeover of state-owned specialty longs maker Xingtai Iron & Steel in North China last February.

The privately-owned steelmakers have also had some success in going abroad, mentioned Lv, citing Jianlong's acquisition of Eastern Steel Sdn. Bhd in Malaysia, Tsingshan Group's founding of a 3 million t/y stainless production base and 2.5 million t/y nickel smelting plant in Indonesia, and Jingye Group's acquisition of British Steel.   

Source : Mysteel Global