It is reported that the merger of Shanshan Iron and Steel Group into Baowu Group has entered a substantial advancing stage. It is reported that the official news will be released after the Spring Festival.
China is the largest producer and marketer of steel and coal in the world, and Baowu Group is currently the "100 million ton aircraft carrier" of the domestic steel industry. Shanshan Iron and Steel Group, which is formed by the merger of Jinan Iron and Steel Group and Laigang, ranks seventh in China in steel output in 2019. It has Shandong Iron and Steel, Jinling Mining, Zhongtai Securities three A-share listed companies and H-share listed Lu Securities Futures.
In recent years, driven by national policies, China has set off a wave of mergers and restructuring and industrial chain clusters in the iron and steel and coal industries. On June 26, 2016, WISCO shares and Baosteel shares issued a suspension announcement, announcing that the parent companies of the two listed companies, WISCO Group and Baosteel Group, are planning strategic restructuring. In September 2016, Baosteel announced that it would absorb and merge WISCO and establish Baowu Iron and Steel Group. The former WISCO Group became a subsidiary of the new group and suspended its listing on the Shanghai Stock Exchange in February 2017 because it was absorbed and merged and no longer qualified as an independent subject.
At that time, the steel output of Baosteel Group was second only to Hegang Group, and WISCO ranked sixth. After resuming trading on October 10 that year, Baosteel shares rose by the daily limit on the first trading day, and the share price fluctuated steadily around 5.6 yuan in the following month.
At that time, Gaohua Securities commented that behind the integration of the two steel giants, the steel industry is expected to benefit from the increase in market concentration. At that time, both Baosteel and WISCO controlled about 75% of the market for high-end automotive steel and about 80% of the market for oriented silicon steel. For Baosteel, it believes that its better profitability makes it face a greater risk of dilution in the short term.
The overall market of the iron and steel industry achieved a "counterattack" in 2016, and Baosteel became the most profitable steel company in A shares in 2016. since then, the share price of Baosteel has continued to rise.
The merged Baowu Group has not stopped the pace of mergers and acquisitions of iron and steel enterprises. On June 2, 2019, Maanshan Iron and Steel Co., Ltd. announced that Baowu of China had reorganized Maanshan Iron and Steel Group, and Anhui State-owned assets Supervision and Administration Commission transferred 51% of Maanshan Iron and Steel Group to Baowu, China free of charge. In the following month, the share price of China Baosteel also fluctuated more smoothly.
In August 2020, China Baowu Group reorganized the stainless steel of Taiyuan Iron and Steel Co., Ltd., and in less than two years, it reorganized two local iron and steel giants through free allocation. Guojin Securities commented that as a traditional asset-heavy industry, the dynamic adjustment of capacity utilization is relatively inflexible, so improving the efficiency of the industrial chain and reducing production and logistics costs is an important trend in the long-term development of the iron and steel industry. Industrial chain clustering is the core driving force. In the next stage, the driving force of the efficiency improvement and cost decline of the asset-heavy industry comes from the integration of industrial agglomeration and industrial chain.
In recent years, the performance of steel enterprises has continued to improve and there is plenty of cash, but the new production capacity in the industry is strictly controlled, and enterprises are also looking for early breakthroughs. Last year, the transformation of steel companies to expand IDC business has become an area of widespread concern. Liu Mengluan and Feng Siyu, analysts at Guoxin Securities, said that the layout of IDC of iron and steel enterprises has its inherent advantages, specifically reflected in land advantages, energy consumption indicators and capital advantages. Baoxin software, which is controlled by Baosteel shares, relies on the rapid growth of the original Luojing plant resources, with outstanding cost advantages and location advantages.
In the future, the party secretary of the State-owned assets Supervision and Administration Commission of the State Council said in August last year that according to the "three-year Action Plan for State-owned Enterprise Reform (2020-2022)", it would take the implementation of the three-year action plan for state-owned enterprise reform as an opportunity to make the enterprise mechanism alive by accelerating the deepening of reform. We will focus on promoting the professional integration of equipment manufacturing, chemical industry, marine equipment, overseas oil and gas assets, as well as the regional integration of coal and power resources. Guoxin Securities said that from the point of view of the digitization of iron and steel enterprises, in addition to Baosteel shares, we can also pay attention to Shagang shares and Hangzhou Iron and Steel shares.
