Shagang to become China's second largest steelmaker

Shagang Group (Shagang), China's third-largest steelmaker (and arguably the runner-up) in terms of crude steel output, advanced its mergers and acquisitions (M&A) strategy by acquiring a 60% stake in Nanjing Iron & Steel United Co. (Nangang) of Chinese conglomerate Fosun International, according to official statements released by the three companies on Wednesday evening.

According to the company, the deal will be worth up to 16 billion yuan ($2.21 billion) and Fosun will no longer own any stake in Nangang if the deal is completed.

Founded in 1958, Nangang is based in east China's Jiangsu Province and produced a total of 11.58 million tons of crude steel in 2021, ranking 22nd among Chinese steel mills, according to the World Steel Association (WSA).

As a leading electric arc furnace steel manufacturer in China, Shagang is also headquartered and operating in Jiangsu Province.

WSA data showed that Shagang's crude steel production in 2021 was 44.23 million tons, ranking third in China behind Baowu Steel Group (Baowu) with 119.95 million tons and Ansteel Iron & Steel Group (Ansteel) with 55.65 million tons.

With the acquisition of a 60% stake in Nangang, Shagang's total steel production capacity is expected to increase to 55.81 million tons per year, which could lead the company to surpass Ansteel to become the second largest steel producer in China and the fifth largest in the world. .

Mergers and acquisitions are also boosting the efficiency and concentration of China's steel industry, a goal set by the central government to optimize the structure of the steel industry, market insiders told Mysteel Global.

“Shagang's latest initiative is in line with Beijing's call for the qualitative development of the domestic steel industry by striving for higher industrial concentration. Meanwhile, by doing this, Shagang also enhances its overall strength and competitiveness. in the coming years,” said Wang Jianhua, chief analyst at Mysteel.

Moreover, Wang also believes that the M&A deal will be beneficial for the development of the steel market in Jiangsu Province. “Because Shagang and Nangang are based in Jiangsu, this merger will help consolidate their steelmaking capacity in the region and help develop the local steel sector – a win-win situation for everyone,” he said.

Mergers and acquisitions have become one of the main topics in the development of China's iron and steel industry since the 13th Five-Year Plan (2016-2020), and have gained importance during the 14th Five-Year Plan (2021-2025) to increase the concentration level in the domestic steel industry. industry, says Mysteel Global.

According to Mysteel tracking, there were 9 M&A deals among Chinese steel companies this year alone.

For example, Ansteel is continuing its merger with Lingyuan Iron & Steel in northeast China's Liaoning province, and Baowu has just acquired over 51% of Xinyu Iron & Steel Co, a major steelmaker in east China's Jiangxi province, as Mysteel. Reported by Global.