The merger and reorganization of the iron and steel industry will be accelerated again Xinyu Iron & Steel Co.Ltd(600782) ( Xinyu Iron & Steel Co.Ltd(600782) . SH) announced on April 24 that Jiangxi state owned capital operation Holding Group Co., Ltd. (“Jiangxi state control”), which holds 100% equity of the company’s controlling shareholder Xinyu Iron and Steel Group Co., Ltd. (“Xingang group”), signed a transfer agreement with China Baowu iron and Steel Group Co., Ltd. (“China Baowu”), and Jiangxi state control will transfer 51% equity of Xingang group to China Baowu free of charge.
Xinyu Iron & Steel Co.Ltd(600782) said that after the transfer, China Baowu will indirectly control 44.81% of the shares of the listed company through Xingang group and realize the control of the company. The actual controller of the listed company will be changed from Jiangxi SASAC to SASAC of the State Council.
Xingang group is an industrial backbone enterprise in Jiangxi Province. The shell finance reporter of the Beijing News learned that the production capacity of Xingang group reached 10 million tons, with 98 directly affiliated and participating holding enterprises, and the annual output of steel exceeded 10 million tons in 2021.
“The merger and reorganization of the iron and steel industry is continuously advancing. On the one hand, it has the role of policy guidance. On the other hand, after entering the mature period, merger and reorganization is the inevitable trend of industry development and the spontaneous market behavior of enterprises.” On April 25, Wang Jing, a researcher of Lange Iron and Steel Research Center, told the reporter of shell finance and economics that China’s per capita crude steel consumption has reached the level at the peak of per capita crude steel consumption in developed countries in the past, and the industry reduction is imperative. The national development and Reform Commission proposed to continue to reduce crude steel production in 2022, which will still be the window period of integration and reorganization at present and in the next few years.
As the world’s largest iron and steel enterprise, China Baowu has continued to merge in recent years and is still promoting the strategic reorganization of Shangang group.
In addition to large state-owned enterprises, private enterprises are also frequently seen in the wave of mergers and acquisitions in the iron and steel industry.
In late March, Jiangxi Fangda iron and Steel Group Co., Ltd. (“Fangda iron and steel”) under China Fangda Group Co.Ltd(000055) group of Liaoning Province announced that it planned to participate in the equity auction of Anyang Iron & Steel Inc(600569) Group Co., Ltd. (“Angang Group”). Shagang Group, another large private steel enterprise, has also expressed interest in participating in the mixed reform of Angang Group, but there has been no progress since then.
Wang Jing told shell finance reporters that with the promotion of capacity integration, the improvement of steel industry concentration is a deterministic trend. Reducing the number of enterprises can optimize the competitive structure of the industry, reduce disorderly competition, stabilize market price fluctuations to a certain extent and promote the stability of steel prices. The integration of tail enterprises is also conducive to focusing on subdivided fields, improving the bargaining power of upstream and downstream, weakening the periodicity of the industry and promoting more stable profits of the industry and enterprises.
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