Caixin
Jul 19, 2018 06:48 PM
BUSINESS & TECH

Two Angang Steel Units Forge New Union

Angang Steel’s products sit in a warehouse in East China’s Jiangsu province in April 2016. Photo: VCG
Angang Steel’s products sit in a warehouse in East China’s Jiangsu province in April 2016. Photo: VCG

Shares of major steel producer Angang Steel Co. Ltd. rallied on Thursday after the company said it would pay 5.9 billion yuan ($878 million) to buy sister company Angang Chaoyang from their parent, bolstering its position in China’s consolidating steel sector.

Angang Steel’s Hong Kong-listed shares rose 4.9% on Thursday, while its mainland-listed shares in Shenzhen finished up 3.8%. The move marks the latest step in Beijing’s broader efforts to consolidate the nation’s vast network of mostly state-owned steel-makers, an effort that has begun to bear fruit as many companies start to show improving financial performance with stabilizing prices.

Based in Northeast China’s Liaoning province, Angang Steel said Angang Chaoyang will become one of its wholly owned units after the purchase from the two companies’ parent, Angang Holding, according to a company statement issued on Wednesday.

The Chaoyang unit is mostly engaged in iron and steel smelting, steel rolling processing, distribution of steel products, iron and steel recycling and coke smelting. Angang Steel’s primary businesses include production of hot- and cold-rolled steel sheets, galvanized steel sheets, silicon steel, wire rods and seamless steel pipes.

“The acquisition is consistent with the current strategy of the company for expansion of its operation in steel production related businesses,” Angang said in the statement. “The acquisition will create strategic synergies within the company and further strengthen the company’s production capability in steel manufacturing industry.”

The merger follows a number of similar deals over the past two years, as Beijing tries to rationalize an industry that became plagued with overcapacity following the recent slowdown in China’s economic growth. That overcapacity has drawn protests from both the U.S. and Europe, which accuse China of dumping state-subsidized steel into their markets and have levied punitive tariffs as a result.

Among the many mergers of the last two years, one of the largest was state-owned Baosteel Group Corp.’s union with Wuhan Iron and Steel (Group) Corp. in 2016 to create China’s largest steel-maker.

The latest merger also comes as steel-makers are seeing improved financial performance with the ongoing consolidation. The Hong Kong- and Shenzhen-listed Angang Steel saw its profit more than triple to about 5.6 billion yuan last year from about 1.6 billion yuan in 2016, according to its latest annual results.

Contact reporter Yang Ge (geyang@caixin.com)

You've accessed an article available only to subscribers
VIEW OPTIONS
Share this article
Open WeChat and scan the QR code