Steeled for An Overhaul

By Wang Jun

China Baowu Steel Group Corp.， Chinas largest steel producer， has acquired a controlling stake in another steel giant Magang Group， according to an announcement by Maanshan Iron and Steel Co. Ltd.（Masteel）， a Shanghai- and Hong Kong-listed company that runs Magangs iron and steel business.

The Anhui Provincial State-Owned Assets Supervision and Administration Commission， which previously held 100 percent of Magangs equity interest， has entered into an agreement to transfer 51 percent to Baowu for free. After completion of the transfer， Baowu will also become the indirect de facto controller of Masteel by holding 45.54 percent of its total share through Magang， said the announcement.

Giant connection

“Baowu and Magang are complementary to or overlap each other in markets and product varieties， but such overlap doesnt matter because the two companies can coordinate with each other in product positioning and development， division of market shares and procurement of raw materials，” Xu Xiangchun， Information Director of Mysteel.com， told 21st Century Business Herald.

In 2018， Baowu and Magang had crude steel production capacity of 70 million tons and 21.7 million tons， respectively， while their output volumes of crude steel stood at 67.43 million tons and 19.64 million tons， respectively， with a combined output of 87.07 million tons， according to fi gures from the China Iron and Steel Association.

ArcelorMittal， the worlds largest steel company based in Luxembourg， stated in its annual report that it produced 92.5 million tons of crude steel in 2018. That means after the takeover of Magang， Baowu will be much closer to ArcelorMittals crude steel output.

Li Jun， an analyst with Pingan Securities Co. Ltd.， explained that Magang is a major supplier of Chinas bullet train wheel hubs， while Baowu has no business in the field. Magangs products such as hot- and coldrolled， color-coated and galvanized sheets will form a complete sheet product system with Baowu that produces high-end sheet products， making the reorganized company more competitive in this area.

In addition， Li said although east China is the largest construction material consumer in the country， Shanghaiheadquartered Baowu provides almost no products to this region， so Magang， which is based in Maanshan， east Chinas Anhui Province， can fi ll Baowus gap in this fi eld with products such as high-speed wire rods and bars.