China’s top 5 steelmakers on track to supply 34% of total output as industry consolidation continues

China’s steel industry consolidation has resulted in four deals to date in 2022, putting the five biggest producers on track to account for 34% of the country’s production, and the acquisition of smaller steelmakers by larger ones will continue to gain momentum in the coming years, steel mill sources said Nov. 14-17.

Industry consolidation will likely enable the sector to have a bigger influence on price settlements with raw material suppliers and downstream steel users, as well as to work in synergy to manage rising environmental protection costs stemming from China’s decarbonization ambitions, the sources said.

China’s largest steelmaker Baowu Group in early November gained approval from the State-owned Assets Supervision and Administration Commission to take a 51% stake in Xinyu Iron & Steel Group in Jiangxi province.

The move will boost Baowu’s crude steel output to over 130 million mt/year, taking it one step closer to its target of producing 200 million mt/year of crude steel by 2025. Baowu has also been working to take over Shandong Iron & Steel, which has a crude steel output of more than 28 million mt/year.

Jingye Group in northern Hebei province with crude steel production of almost 13 million mt/year signed an agreement in late October to take over Yuebei Iron & Steel, which has a capacity of around 2 million mt/year.

Taking over Yuebei Iron & Steel in southern Guangdong province will elevate Jingye from China’s 15th largest steelmaker to the 13th and expand its presence in the South China steel market.

Also in October, China’s third largest steelmaker Shagang Group reached an agreement with Fosun Group to purchase a majority stake in Shanghai-listed Nanjing Iron & Steel, which will take Shagang’s production capacity to more than 55 million mt/year, on par with the country’s second largest steelmaker Anshan Iron & Steel, or Ansteel.

However, Ansteel is likely to remain the larger producer as it has been working to acquire Lingyuan Iron & Steel Group since June, an acquisition that will raise its crude steel output to over 61 million mt/year from 55.65 million mt/year in 2021.

After the acquisitions by Baowu, Jingye, Ansteel and Shagang are completed, China’s five largest steelmakers will account for 34% of the country’s production, and its top 15 steelmakers 54%, up from 29% and 49% respectively in 2021.

Some mill sources believe that the top five steel producers would eventually contribute more than 40% of national production.