China’s Baowu Steel Group is negotiating the purchase of Shandong Iron and Steel Group with an official announcement from both the companies expected after the Chinese Lunar New Year holiday.
According to media reports, if the acquisition comes through the resultant entity would combine Shandong’s 30mn mt and Baowu’s 100mn mt steel capacity and create potential synergies to increase their combined capacity to 150mn mt, producing 15pc of China’s total steel output.
According to recent statements by China’s Ministry of Industry and Information Technology (MIIT), the Asian nation plans to accelerate the reduction of steel output. The strategies include a ban on illegal additions of new capacity, increasing its guidance on strategic capacity swaps within firms, and a push for mergers or restructuring.
The latter would help solve long-term issues around resource allocation, synergies, and competition. MIIT says it is committed to focusing on carbon emissions and have steel output fall in 2021 although China exceeded 1bn mt of crude steel production in 2020.