China’s large state-owned enterprise Baowu Group will recently merge with Shandong state-owned enterprise Shansteel Group, making Baowu continue to be the world’s largest steel company, far ahead of overseas steel companies in terms of size. Analysts believe that this move by Baowu Group, a central enterprise, further indicates that China is accelerating the pace of “planned economy”.
On Thursday evening (Jan. 28), mainland media disclosed that Shandong steel company Shansteel Group had entered a substantive stage of advancement when it was merged into Baowu Group. According to the 21st Century Business Herald reporter learned from a source, ten days ago, Shansteel has confirmed that it will be merged into Baowu Group, is expected to be officially announced after the Spring Festival.
According to Caixin this Friday, the world’s largest Baowu Group continues to expand and will soon merge with Shan Steel Group with a capacity of 28.9 million tons, the total capacity may increase to 145 million tons, which is the sixth steel company merged and restructured by Baowu Group in the past two years.
China Baowu Iron and Steel Group Co.
Baowu Group in the past two years a large number of mergers and acquisitions
Hebei Tangshan Iron and Steel Group, a technical director Su Zhijun said in an interview with this station on Friday, Baowu Group has acquired a number of companies, making its domestic market share is growing: “some Time ago to acquire TISCO, Taiyuan Iron and Steel Company is a large stainless steel companies around the world, and then before the acquisition of heavy steel (Chongqing Iron and Steel Group), Shaoguan Iron and Steel Company, and Maanshan Iron and Steel Company. TISCO just acquired a short time ago.”
Baowu Group’s capacity scale is already located in the world’s first. at the end of 2016, the former Baosteel Group and the former Wuhan Iron and Steel Group jointly reorganized to establish Baowu Group, the total capacity of that year about 58.5 million tons. in September 2019, Baowu Group acquired Anhui local state-owned enterprise Ma Steel Group, the total capacity increased to 90 million tons; in August 2020, Baowu Group then merged with Taiyuan Iron and Steel Group with a capacity of 12.94 million tons; in September Ltd. in September, the total capacity increased to 111 million tons; in November, it acquired Xinxing Casting Pipe and Xinjiang Ili Steel, the capacity increased to 115 million tons.
Local steel enterprises gradually into the central enterprises
The authorities have recently continued to facilitate the merger of local state-owned enterprises by Baowu Group, Su Zhijun told the station that Baowu Group is ahead of local state-owned enterprises in the field of operation, so the central state-owned assets regulator wants to bring local steel enterprises into the scope of management of Chinese enterprises: “Baosteel is still the best managed steel company in the country so far, and they have managed it well, so they have to be used to manage others ( other steel companies). The steel industry always mentions ‘concentration’ within the industry, for example, this kind of bulk raw materials in the United States, there should be a few big companies accounting for 60 percent of the market to increase ‘concentration’. Then there are in some system, these enterprises are I (government) control, I say let them (enterprises) do, they have to listen to me to do.”
Central state-owned assets supervision department hopes to include local steel enterprises in the management of Chinese enterprises
Public information shows that Shansteel Group was established in March 2008, as of June last year, total assets of about 368 billion yuan, last year, the group’s steel production ranked 11th in the world, the domestic 7th, and in 2020, the Fortune Chinese network released the world’s top 500 list, ranked 459. 2020 steel production exceeded 30 million tons.
Central enterprises further monopolize the market steel prices
According to Shandong financial scholar Commander, the authorities’ move is suspected of following the old path of the “planned economy” of 40 years ago: “Now it seems that China is moving towards the era of planned economy, which means that the trend of turning to the left is accelerating. It means that the trend of oligopolistic competition or monopolistic economy is becoming more and more prevalent in China’s steel market, and the situation of a dominant state-owned economy is becoming more obvious.”
The merging of the two state-owned enterprises will certainly streamline the workforce again, which in turn will cause workers to lose their jobs, putting new pressure on local governments and triggering social conflicts, the director said.
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