Beijing Turns to Private Industries to Help Reform Metallurgy

A senior official from China's Ministry of Industry and Information Technology (MIIT) said at a recent event hosted by the China Chamber of Commerce and Industry (CCCME) that China's private steel producers are "playing an increasingly important role" in the development of the steel industry. This public recognition of their importance, given to a group of the largest and most influential private steel producers in China, is seen by some as Beijing's call for private companies to continue helping state-owned enterprises.

Of course, private mills more than carry their weight, and at the November 23 event, CCCME reported that Chinese private steel producers produced 507 million tonnes of crude steel in January-September, or about 63% of the nation's total.

In January-September, these private steel companies earned 206 billion yuan ($ 32.2 billion) in profits, up 99% year-on-year, reflecting "an all-round increase in the competitiveness of private steel companies," CCCME said.

Speaking at an event on November 23, the official stated that "private steel companies are an indispensable and important force that has propelled our steel industry from small to large and from weak to strong."

Lvov noted that in order to accelerate the development of the country's steel sector over the next five years, private steel mills must continue to monitor steel production, improve product quality, and promote low-carbon and smart steel production. More importantly, Lvov said he called on these "competitive private steel producers" to step up efforts to increase industrial concentration.

While Lvov did not directly mention the ongoing restructuring of China's metallurgical sector and the role that private enterprises play as strategic partners of state-owned steel enterprises, it is clear that MIIT would like more private enterprises to invest their expertise - as well as funds - in testing difficulties of enterprises with state participation.

Just last Wednesday, Anyang Iron & Steel Group (Angang), a large state-owned steelmaker in Henan province in central China, announced that it is continuing its `` mixed ownership reform '' and hopes Shagang Group (Shagang) is the largest in China is a private company. the company that owns the steel mill will become a strategic investor, as reported.

Angang's launch of the mixed ownership reform aims to "change (its system and mechanism), bring innovation and energy, and promote the integration, modernization and 'high quality' development of the Henan steel industry," Anyang Steel said in a statement.

According to Lev, Shagan is an example of the dynamism of the private sector that the Chinese steel industry will need to meet the central government's goal of raising industry concentration to 60% by 2025 from 39.2% by 2020. In his address to CCCME, Lvov indicated it was revealed that Shagang had acquired the state-owned special steel company Dongbei Special Steel Group in Northeast China.

Lvov also noted that his active use of mergers and acquisitions in recent years has helped Jianlong Group, a steel conglomerate headquartered in Beijing, grow to a steel producer with a capacity of 42 million tons per year. Jianlong's acquisitions included the largest steel companies in Heilongjiang Province in northeast China, as well as the recent takeover of state-owned long products manufacturer Xingtai Iron & Steel in North China last February.

Private steel companies have also made some headway in overseas travel, Lvov said, citing Jianlong's acquisition of Eastern Steel Sdn. Bhd in Malaysia, establishment of the Tsingshan Group of a 3 Mtpa stainless steel production base and a 2.5 Mtpa nickel smelter in Indonesia, and the Jingye Group's acquisition of British Steel.