Chinese steel companies face more mergers and acquisitions

After Anyang City in Henan province announced an integration plan for its steel companies, Handan City in Hebei province and Xuzhou City in Jiangsu province have now also introduced plans to merge steel companies. Local governments believe that allowing steel companies to integrate and reducing their numbers is conducive to the elimination of backward production capacity, Kallanish notes. It is also necessary for the upgrading of the steel industry in the region, they believe.

Handan City plans to integrate 17 steel companies into 8 by the end of 2020 and further reduce the number of steel companies by 2025. The Handan government is looking to see 15 million tonnes/year of high-quality steel capacity in 2020, accounting for 30% of its total steel production capacity. It also intends to increase these two targets to 20m t/y and 50% respectively by 2025.

Xuzhou City in Jiangsu province meanwhile has announced the integration of 18 steel companies in the region to form 2 large-scale steel complexes and 3 production sites. It will reduce total steel capacity by -30% at the same time. The city’s 11 coking companies will be integrated into 3 comprehensive coking entities, reducing -50% of the city’s original coking capacity. Up to now, 10 of 18 steel companies in the city have been decommissioned and a further 5 will be shut down by the end of June 2020. After the integration, the remaining three will be Zhongxin Steel, Xuzhou Iron & Steel and Jinhong Steel. Three of the 11 coking companies have been closed, and five will be closed and integrated by the end of June 2020. The remaining three coking producers will be Yizhou Coking, Tian’an Coking, and Jiantao Coking.

The Steel Industry Adjustment and Upgrade Plan (2016-2020) issued by the Ministry of Industry and Information Technology in 2016 said that China’s crude steel production should be limited to 1 billion tonnes by 2020. 60% of total steel production was intended be generated by the top 10 steelmakers. This long-standing national goal has never been met, but local governments have made some progress in uniting local capacity in recent years.