Baowu Plans To Reorganize The Crude Steel Production Capacity Of Shangang Group To Be Close To 150 Million Tons

It has been rumored for a long time that Shangang group was merged into Baowu group, and the boots landed.

As the iron and steel giant in Shandong Province, the joining of Shangang group will enrich the product category of Baowu group, and strengthen the channel advantage of Baowu group in Shandong Province. For Shangang group, relying on Baowu group is also conducive to play a larger scale advantage of both sides.

Driven by Baowu group, the industrial concentration of steel head enterprises has increased significantly, but there is still a big gap compared with the previous target set by the regulatory authorities. It can be predicted that the pace of merger and reorganization of head steel enterprises will continue.

"One hundred million tons of Baowu" will be launched again

On the evening of July 14, Shandong Iron and steel (600022) announced that the state owned assets supervision and Administration Commission of Shandong Province and Baowu group were planning the strategic restructuring of Shangang group, which may lead to the change of controlling shareholders and actual controllers of the company.

This is also the Baowu group in a row of mergers and acquisitions and the world's first, again to take over the merger and reorganization of large steel enterprises.

Shandong Iron and steel group was established in 2008, through merger and reorganization of Jinan Iron and steel and Laigang shares. In 2020, the group's revenue will exceed 220 billion yuan, and the crude steel production capacity will exceed 31 million tons, ranking 459 of Fortune 500 in that year.

Shandong Iron and Steel Group has three A-share listed companies, Shandong Iron and steel (600022. SH), Jinling mining (000665. SZ), Zhongtai securities (600918. SH) and one H-share listed company of LUZHENG Futures (01461. HK). Among them, Shandong Iron and steel is the only steel listed company in Shandong Province, with Jinan Steel City and Rizhao two production bases.

Baowu, China's largest steel producer in China and even in the world, ranks first in crude steel production.

According to the data released by the world iron and Steel Association, the crude steel output of Baowu group will be 115 million tons in 2020, surpassing ArcelorMittal to become the world's first; Relying on the crude steel output of 31.11 million tons, Shangang group ranks the tenth in the world and the seventh largest steel company in China.

If Baowu group is finally merged with Shandong Iron and Steel Group, the total crude steel output of both sides will be close to 150 million tons, accounting for 14% of the current total crude steel output in China, and further stabilize the position of the world's first crude steel output, and further expand the advantage of leading the second place.

At present, China's iron and steel industry is still in a state of high degree of dispersion. It is precisely because of this that some people in the industry expected that the pace of merger and reorganization of Baowu group would not stop, and the current scale is only the "starting point".

Jinan Iron and steel, Laiwu Iron and steel and Yongfeng iron and steel group of Shandong Iron and Steel Group mainly produce medium and heavy plate for boiler, long timber for construction and special steel project respectively. The addition of Shangang group not only expands the product category of Baowu group, but also enhances the channel capacity of Baowu group in Shandong Province.

In June this year, the office of the board of directors of Shandong Iron and steel group pointed out in the financial information announcement in 2020 that, in the long run, the domestic steel industry is still facing the pressure of demand decline and volume reduction adjustment, and the steel industry will gradually turn to the state of low profit or even meager profit, which will affect the effect of scale economy and specialization division of labor. In addition, the iron and steel industry is one of the first eight key industries to be included in the national unified carbon market, and the market-oriented carbon emission trading will become a double-edged sword for the production and operation of enterprises.

The board of directors of Shandong Iron and steel group pointed out that today's competition among steel enterprises has developed from competition among enterprises and industrial chains to competition among ecological circles. It has entered a new round of adjustment period of industry merger and reorganization, layout optimization, transformation and upgrading.

Wang Guoqing, director of Lange Iron and Steel Research Center, pointed out to the 21st century economic reporter that the scale advantage of Baowu after restructuring will be further highlighted. The coordinated development in procurement, production, research and development, sales, management and industrial chain cooperation will help Baowu group optimize its product structure, eliminate homogeneous competition, and achieve overall quality and efficiency improvement, Help Baowu and Shangang continue to develop well.

The advantages of iron and steel industry have been concentrated and accelerated

According to the data of the world iron and Steel Association, China's crude steel output will reach 1.065 billion tons in 2020, ranking first in the world, accounting for 56.7% of the total global crude steel output, far exceeding India and Japan, which are ranked second.

From the company level, Chinese enterprises occupy seven places in the list of top ten crude steel production enterprises in 2020.

In recent years, in the context of China's resolution of steel overcapacity and industrial restructuring, in 2016, the strategic restructuring of Baosteel Group and WISCO group opened the prelude to large-scale merger and reorganization of China's steel industry.

Three years after the reorganization and integration of Baowu group, by taking 51% of the equity of Masteel group, Baowu group has opened a new mode of restructuring local large state-owned enterprises by central enterprises. Since then, Baowu group has successively merged TISCO group and reached cooperation with Guangdong yueshao steel and Chongqing Iron and steel.

During the 13th Five Year Plan period, the concentration of iron and steel industry is on the rise. The crude steel output of the top ten iron and steel enterprises accounted for the national proportion, which increased from 35.9% in 2016 to 39.2% in 2020, and the crude steel output of the top five iron and steel enterprises accounted for 25.9% of the country.

The strategic restructuring of Baosteel will effectively enhance the concentration of iron and steel industry and help to improve the discourse power of iron ore procurement pricing. According to the calculation data of Lange Iron and Steel Research Center, Baowu's merger and reorganization of Shangang will increase the concentration of iron and steel industry from 39.2% to 40.9% in 2020, an increase of 1.7%.

Since this year, the merger and reorganization of large-scale domestic steel enterprises has been constantly moving. In April, Benxi Steel (000761. SZ) disclosed that Angang planned to restructure Benxi Steel Group, which may lead to the change of control right of the company.

According to the output in 2020, if Anshan Iron and steel group finally merges Benxi Steel Group, the crude steel output of both sides will exceed 55 million tons, ranking the third in the world after Baowu group and ArcelorMittal in scale.

In May, Anyang Iron and steel (600569. SH) announced that Shagang Group, the largest private enterprise in China, intends to participate in the mixed reform of Anyang Steel Group and become the controlling shareholder of Anyang Steel Group. According to the production scale of crude steel, Shagang Group is the third largest iron and steel enterprise in China, second only to Baowu group and Hegang group.

If Anyang Steel Group and shagang group reach a final agreement, the crude steel output of both sides will exceed 50 million tons, becoming a strong competitor of the second largest steel enterprise in China.

Some people in the iron and steel industry told the reporter of the 21st century economic report that local state-owned iron and steel enterprises were more willing to maintain their advantages in the local market and were more resistant to the reorganization of enterprises outside the region. But in recent years, with the drastic changes in the operation of the steel industry, industry merger and reorganization has become the general trend, and the attitude of steel enterprises has also changed significantly.

In December 2020, the Ministry of industry and information technology (MIIT) proposed in the "guidance on promoting the high quality development of the iron and steel industry (Draft)", and strive to achieve 40% industrial concentration of the top five iron and steel enterprises and 60% of the top 10 iron and steel enterprises by 2025.

But at present, these two values are still quite far away from the target. In order to rapidly improve the industrial concentration of the head steel enterprises and realize the rapid growth of large-scale steel enterprises' production capacity, the merger and reorganization of large-scale steel enterprises will continue.