China to merge two steel makers
By Jianguo Jiang and Helen Yuan (Bloomberg)
Updated: 2005-08-16 07:15

SHANGHAI Anshan Iron & Steel Group, the second-largest steel maker in China by output, said Monday that it would merge with a smaller rival, the biggest move so far in the Chinese government's effort to make its steel industry more competitive.

An undated file photo shows a corner of the Anshan Iron& Steel Group in northeastern Liaoning Province. [Net]

Anshan Iron & Steel is combining with Benxi Iron & Steel Group, the nation's fifth-biggest producer, to form Anben Steel Group, which will have an annual output of almost 20 million tons. Shanghai Baosteel Group, the biggest, produced 21 million tons last year.

China, which produces one-third of the world's steel, has been trying to curb expansion in the industry following a doubling of output in the past four years which has driven up iron ore and coal prices to record levels, fueling inflation.

The government plans to shut smaller mills among the 264 steel makers and force mergers to create two companies big enough to compete with rivals like Mittal Steel, the National Development and Reform Commission, China's top economic planning agency, said on July 20.

"It's the biggest merger in China's steel industry so far. It indicates the consolidation, an inevitable trend in China's steel industry, is likely to speed up," Sun Zhanjun, an analyst at Citic Frontier China Research, said in a phone interview from Shanghai.

The Chinese government hopes that China's top 10 steel makers will account for half the country's output by 2010 and 70 percent by 2020. The top 15 steel makers account for 45 percent now. Wuhan Iron & Steel, China's third-biggest steel maker, said in May that it would acquire Liuzhou Iron & Steel, a smaller rival in the southern province of Guangxi.

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