The merger of two of China's largest steel producers will lead to the formation of a new steelmaking company with the potential to unseat the current industry leader, Hebei Iron and Steel Group, South China Morning Post (SCMP) reported on Monday.
Baosteel Group is China’s second largest steel maker, and Wuhan Iron and Steel Group (often called Wisco) is the sixth largest. On Sunday they filed stock exchange reports announcing their intention to merge and restructure their enterprise.
The merger is being encouraged by the Chinese government, which wants to increase competitiveness in industries where a glut of production is causing particularly low prices. According to SCMP, dozens of state-owned steel mills have been under growing pressure to consolidate and eradicate uncompetitive production lines.
In February the Chinese government said it wants to cut 100-150 million tons of steel capacity, and 500 million tons of coal production over the next three to five years. However, the plan has made slow progress because of concerns over the consequences of mass job losses and lost tax revenues.
On Sunday, China revised its goals and announced it aims to cut only 45 million tons of steel capacity and 280 million tons of coal production.
Stock market analyst Dmitriy Tratas told Sputnik that the new steel giant is not only capable of pushing China's Hebei Iron and Steel Group from its leading position in China, but of becoming a world leader.
With a combined output of 62.72 million tons per year, he said the new company could also take second place in the world arena. The only bigger producer will be steelmaking corporation ArcelorMittal, registered in Luxembourg, which manufactures 97.14 million tons per year.
Source: sputniknews