Baosteel to Take Over Rivals in China Stimulus Plan

Baltic Dry Index,Baltic Dry Indices,Ship Chartering,Shipchartering,Voyage Fixtures,Time Charter Fixtures,Panamax,Capesize,Handymax,Handysize,Supramax,Dry Cargo Fixtures,Bulk Cargo Fixtures,Baltic Exchange,Freight Review,Maritime Baltic Index,TNT Freight Review,Baosteel Group Corporation, Baosteel, Ningbo Iron & Steel Group, Baotou Iron & Steel Group, Chi Jingdong, Anben Steel Group, Panzhihua Iron & Steel Group, Taiyuan Iron & Steel Group, Iron Ore, Coal, Mergers, China Steel

Sunday, 22 February 2009

Baosteel Group Corp., China’s biggest steel producer, will take over two rivals as part of the nation’s plan to create bigger steelmakers to gain bargaining power for iron ore, according to the China Iron and Steel Association. Baosteel will take over Ningbo Iron & Steel Group and Baotou Iron & Steel Group, Chi Jingdong, the association’s secretary-general, told an industry group in a closed meeting yesterday. Bloomberg News received a copy of the speech today. China, which produces one-third of the world’s steel, is pushing for consolidation in the industry to boost its competitiveness and raw material purchasing power. The government is implementing a 4 trillion yuan ($585 billion) stimulus package to boost flagging economic growth as it faces the worst financial crisis since the Great Depression. “The global recession will help speed up industry consolidations,” said Luo Wei, a Shanghai-based analyst with China International Capital Corp. “Boosting the concentration will increase steelmakers’ profit and their pricing power.” Chinese steelmakers are seeking the first reduction in seven years for benchmark contract iron ore prices as demand from carmakers and builders falls. The government will also push Anben Steel Group, China’s fourth-biggest, to merge with Panzhihua Iron & Steel Group, while Taiyuan Iron & Steel Group, the biggest stainless steelmaker, will combine with rivals in Shanxi, Chi said. Chi was not immediately reachable for comment. Consolidation The nation’s top five steelmakers will lead the government’s consolidation plan with their capacity eventually making up more than 45 percent of China’s total output in three years, Chi said. Baosteel set up an alliance in July 2007 with Baotou Steel to help the Inner Mongolia-based mill improve production and develop iron ore, rare earth and coal resources, in preparation for a takeover. Baosteel had also been in talks to buy stakes in Ningbo Iron & Steel Co., the China Business News reported Feb. 9. The plan, approved by the State Council on Jan. 14, is pushing industry consolidation more aggressively than a government guideline announced in July 2005 after contract iron ore prices gained for six straight years to a record because of Chinese demand. The aim is to create steelmakers with annual capacity of 50 million tons a year by 2011, Chi said. Capacity Expansions The biggest producers are already expanding capacity at plants along the coast including Zhanjiang, Fangcheng Port and Rizhao, Chi said. Steel plants in coastal areas should make up 20 percent of the nation’s total capacity by 2011, Chi said. China will also shut down 25 million tons of obsolete steelmaking capacity and 72 million tons of iron making capacity, the document said. Blast furnaces smaller than 400 cubic meters should be closed, it said, raising the cut-off threshold from 300 cubic meters the government had set in July, 2005. China had asked its top ten steel producers to account for 50 percent of domestic output by 2010 and 70 percent by 2020, the National Development and Reform Commission said in 2005. Source: Bloomberg