Higher industry concentration boosts bargaining power, enhancing negotiation skills in raw material procurement like iron ore, and improving profit distribution along the industry chain

•Mergers and restructurings of steel companies will swiftly boost industry concentration, yielding multiple benefits for China's steel industry development. Steel company mergers and restructurings hasten resource allocation optimization and overall industry efficiency. They regulate industry development and boost global competitiveness, foster technological innovation, promote industry progress, and aid in reconstructing the steel industry supply chain, enhancing its security.

•From SMM's perspective, despite varied purchasing behaviors of acquired steel mills, mergers and acquisitions still heighten group concentration, yielding some bargaining power in long-term negotiations with overseas mines and volume-related discounts in long-term contracts.

üSteel Mill 1: Our mutual acquisition, not involving equity, assets, business, or personnel adjustments, won't affect independence between the acquired and acquiring parties. The acquired party will retain independent operational capabilities, staying autonomous in procurement, production, sales, intellectual property, etc. However, we'll set up an information intelligence platform to foster centralized procurement of intelligence resources and on-demand procurement, effectively preventing cost increases due to information asymmetry. Moreover, post-acquisition, we can also glean from the excellent procurement practices of other subsidiary steel mills within the group.

üSteel Mill 2:Post-acquisition, our group standardizes raw material procurement, including iron ore, coal, etc., considering even overseas steel mills within the domestic procurement system. Different mills submit planned volumes to headquarters, which centrally orchestrates price negotiations. Therefore, the group holds long-term contracts with various overseas mines, including the mainstream four mines, Roy Hill, and South African mines, benefiting us in price negotiations.