China steel sector facing reshuffle
According to recent news in the market China's booming steel sector is apparently going through a reshuffle. China's largest steel producers Baoshan Iron & Steel Co (Baosteel) Wuhan Iron & Steel Co. and Anshan Iron & Steel Co. are reported to be in merger talks with smaller producers. Market reports state that Shanghai-based Baosteel is reportedly in merger talks with Ma'anshan Iron & Steel Co. located in eastern China's Anhui province and Handan Iron & Steel in north China's Hebei province. However, Baosteel is currently denying the merger rumors with Ma'anshan and Handan and claiming that the company is only considering cooperation in management and technology. Analysts, on the other hand, believe that the cooperation talks between Baosteel and Ma'anshan are the first steps toward an ultimate acquisition between the two steel producers. Baosteel, with a current annual steel production capacity of roughly 20 million tons, targets to produce 30 million tons by 2009, with an ultimate goal of 50 million tons. Wuhan Iron & Steel, based in central China's Hubei Province, is apparently in talks with Echeng Iron & Steel Co. in Hubei, Chongqing Iron & Steel in southwestern Chongqing municipality and Hangzhou Iron & Steel in eastern Zhejiang province. If Wuhan is successful in its acquisitions of Echeng, Chongqing and Hongzhou, its annual production capacity will more than double to 20 million tons. Anshan Iron & Steel, based in northeast China's Liaoning Province, reportedly entered into talks last year with Benxi Iron & Steel about a possible acquisition, but no significant steps have since been taken. Anshan and Benxi steel firms last year produced 10.2 million and 7.2 million tons, respectively. Steel sector analysts are positively assessing these developments in the Chinese steel industry, stating that a consolidation of the sector is greatly needed in order to enhance its international competitiveness. Vice-Chairman of China Iron and Steel Association (CISA) also announced his agreement with the ongoing consolidation talks and stated that with over 2'000 steel producers in China, only two of which produce more than 10 million tons of steel per year, fragmentation is a major problem for the Chinese steel industry, and the main cause of the continuous overheating in the industry.