Two of China’s top steelmakers yesterday announced plans to merge,creating the world’s second-largest manufacturer of the commodity as markets struggle with a glut caused by Chinese overcapacity.
The world’s second-largest economy is trying to overhaul its lumbering state sector and especially its steel industry, by using mergers and restructuring to cut chronic overproduction and create world-beating mills.
Baosteel Group (寶鋼集團), China’s second-largest steelmaker, is to issue new stock to existing shareholders of Wuhan Iron and Steel Group (武漢鋼鐵) to absorb the other company, the state-owned companies said in separate statements to the Shanghai Stock Exchange, where they are listed.
They did not give further details.
The two firms rank fifth and 11th respectively in world production capacity.
The merger will form a new company called China Baowu Iron and Steel Group (中國寶武鋼鐵), China Business News reported late on Monday, adding that the state asset watchdog had already given the plan the green light and submitted it to the Chinese State Council for final approval.
The combined production capacity of the two firms reached 60.7 million tonnes last year, data from the World Steel Association showed, which would make the new entity the world’s second-biggest producer by capacity — behind ArcelorMittal.
Chinese steel demand has slumped as economic growth slows and the global steel industry is assailed by overcapacity. The crisis has seen manufacturers in Asia, Europe and the US suffer huge losses, and it has led to political rows and accusations of dumping.
Shanghai-based Baosteel’s net profit plummeted 83 percent to 1.0 billion yuan (US$150 million) last year, while Wuhan Steel lost 7.5 billion yuan, compared with a 1.3 billion yuan net profit in 2014.
An analyst said the merger between Baosteel and Wuhan Iron and Steel was “merely the beginning” of more such moves in the Chinese steel industry.
“Restructuring in China’s steel industry is the trend and it’s an unstoppable one,” said Chen Bingkun, an analyst at Minmetals and Jingyi Futures (五礦經易期貨).
The restructuring of another two Chinese steel giants both based in northeastern province of Liaoning — Ansteel (鞍山鋼鐵) and Benxi Steel Group (本溪鋼鐵) — is next on the agenda, the Shanghai Securities News reported yesterday.
It quoted Chi Jingdong (遲京東), vice secretary general of the China Iron and Steel Association.
Ansteel is the world’s seventh-biggest mill and Benxi Steel ranks 21st.
The listed arms of the two groups suspended trading in Shenzhen yesterday pending statements on the report.
Investors in Hong Kong cheered the news, with Ansteel shares jumping 2.81 percent yesterday afternoon.
Analysts said the mergers would help China deal with overcapacity that has long plagued manufacturers.
Beijing has vowed to eliminate 100 to 150 million tonnes of capacity — out of a total of 1.2 billion tonnes — by 2020.
“China is now trying to cut down its steel production through policy and restructuring of the industry is a second way to help. Once the merged giants form a monopoly in the market, it will start to control production,” Chen said.
“The result of this restructuring is to integrate China’s steel industry and pave the way for China to export its steel capacity,” Chen added.
BUSINESS UPDATE: The iPhone assembler said operations outlook is expected to show quarter-on-quarter and year-on-year growth for the second quarter Hon Hai Precision Industry Co (鴻海精密) yesterday reported strong growth in sales last month, potentially raising expectations for iPhone sales while artificial intelligence (AI)-related business booms. The company, which assembles the majority of Apple Inc’s smartphones, reported a 19.03 percent rise in monthly sales to NT$510.9 billion (US$15.78 billion), from NT$429.22 billion in the same period last year. On a monthly basis, sales rose 14.16 percent, it said. The company in a statement said that last month’s revenue was a record-breaking April performance. Hon Hai, known also as Foxconn Technology Group (富士康科技集團), assembles most iPhones, but the company is diversifying its business to
Apple Inc has been developing a homegrown chip to run artificial intelligence (AI) tools in data centers, although it is unclear if the semiconductor would ever be deployed, the Wall Street Journal reported on Monday. The effort would build on Apple’s previous efforts to make in-house chips, which run in its iPhones, Macs and other devices, according to the Journal, which cited unidentified people familiar with the matter. The server project is code-named ACDC (Apple Chips in Data Center) within the company, aiming to utilize Apple’s expertise in chip design for the company’s server infrastructure, the newspaper said. While this initiative has been
GlobalWafers Co (環球晶圓), the world’s No. 3 silicon wafer supplier, yesterday said that revenue would rise moderately in the second half of this year, driven primarily by robust demand for advanced wafers used in high-bandwidth memory (HBM) chips, a key component of artificial intelligence (AI) technology. “The first quarter is the lowest point of this cycle. The second half will be better than the first for the whole semiconductor industry and for GlobalWafers,” chairwoman Doris Hsu (徐秀蘭) said during an online investors’ conference. “HBM would definitely be the key growth driver in the second half,” Hsu said. “That is our big hope
The consumer price index (CPI) last month eased to 1.95 percent, below the central bank’s 2 percent target, as food and entertainment cost increases decelerated, helped by stable egg prices, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday. The slowdown bucked predictions by policymakers and academics that inflationary pressures would build up following double-digit electricity rate hikes on April 1. “The latest CPI data came after the cost of eating out and rent grew moderately amid mixed international raw material prices,” DGBAS official Tsao Chih-hung (曹志弘) told a news conference in Taipei. The central bank in March raised interest rates by