The merger of China’s Anshan Iron & Steel, or Angang, and Benxi Iron & Steel, or Bengang, may materialize in the near future, having stalled since 2005, when both had reached an agreement to
combine their production data.This signals an acceleration in the consolidation of China’s steel industry, which will help the industry have a bigger say in price settlement with raw material suppliers and downstream steel users.
According to Bengang's Shenzhen-listed arm, Bengang Steel Plates Co., Angang has been preparing to acquire Bengang, although the acquisition still requires governmental approval. Some market sources
expect the deal, pushed by the central government, to be completed soon, which will propel Anshan to become China's second largest steelmaker, after the Baowu Group, from its current fourth position.
Both Angang and Bengang are located in northeastern China's Liaoning province, but Angang is owned by the central government’s State-owned Assets Supervision & Administration Commission, while
Bengang belongs to Liaoning province’s SASAC. The different owners of the assets, with tax re-allocation problems, was the main reason behind the impasse of the merger.
However, with Baowu Group, also a central government SASACowned steelmaker, having successfully taken over a number of provincially-owned steelmakers in the past two years, market sources
are of the opinion that different ownerships is no longer an obstacle for mergers and acquisitions in China's steel industry. Therefore, the industry's consolidation, which includes Angang taking over Bengang,
is expected to speed up.Angang produced 38.2 million mt of crude steel in 2020, while Bengang, China's 11th largest steelmaker, produced 17.4 million mt of crude steel in 2020, market sources said.
After absorbing Bengang, Angang's annual crude steel production could reach around 55.6 million mt/year, second only to the Baowu group, that produced 115.3 million mt of crude steel in 2020.
The combined crude steel production of the top five Chinese steelmakers, after the merger of Angang and Bengang, will account for around 27% of China's total crude steel production, up from 26%
presently, according to S&P Global Platts calculations based on the steelmakers' production.
The ratio is expected to increase further in the coming years, as Angang is set to boost its crude steel capacity to 70 million mt/year by 2025 through acquisitions, while market sources suggest that
the Baowu Group is looking to acquire Shandong Iron & Steel, which produced 31 million mt of crude steel in 2020.China’s Ministry of Industry and Information Technology has set the target to increase the ratio of the top five steelmakers’ crude
steel output to China’s total output to 40% by 2025. Some market sources expect this target will be achieved on time, especially since China is determined to reduce the emission of pollutants, which
will squeeze the breathing room of small and less environmentally friendly steelmakers.
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