China has appointed the former president of Baoshan Iron & Steel Co. to chair rival group Ansteel Group Corp., signaling its intention to merge the two parent companies and create a steel giant that would outperform ArcelorMittal as the world's largest producer, with people close to the subject. Shares in the publicly traded groups rose.
The combination of the two will help Baoshan's parent company and China's largest producer, Baowu Steel Group Corp, reach its 100 million metric tons annual production target by 2021, and the government must meet its goal of concentrating production . 60% of production in the hands of its top 10 plants by 2020, said the people, who asked not to be identified as the information is not public, said Bloomberg.
The sources did not release deadlines for the agreement and said the plan could still undergo changes
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Baoshan announced on Monday that its president, Dai Zhihao, had resigned. The State Asset Supervision and Administration Commission (Sasac), which oversees the two companies, said on Wednesday in its Weibo account that Dai would assume the top executive position at Ansteel.
Ansteel Group is China's third largest steel company, while Baowu itself is the product of a mega-merger two years ago. Together, both companies produced 101 million tonnes of steel in 2017, according to the World Steel Association, about 4 million tonnes more than Arcelor. At the end of last year, combined revenues totaled 493 billion yuan ($ 71 billion), slightly over Arcelor's $ 69 billion.
China, the world's largest steel producer, aims to improve the sector by controlling capacity, consolidating production and reducing pollution. Speculation about which companies could merge is frequent, and a report in September indicated that Baowu was in talks to acquire Magang Group Holding Co.
Sasac did not immediately respond to a fax requesting comments. Baowu spokespersons based in Shanghai and Ansteel, Anshan and Liaoning said they were unaware of the merger plan and declined to comment further.
Shares in the listed divisions rose, reversing previous losses; Baoshan rose to 3.4% in Shanghai and Angang Steel Co., an increase of 8.4% in Shenzhen. Shanghai Baosteel Packaging Co. increased the maximum allowable price variation on the Shanghai Stock Exchange.
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