Sinosteel-Baowu integration signals industry recast

The restructuring of Sinosteel Group Corp Ltd, or Sinosteel, will further improve the structure of China's steel industry and bring stability to the commodity's prices in the years ahead, market observers said on Wednesday.

Their comments were in response to the announcement by the State-owned Assets Supervision and Administration Commission, the country's top State asset regulator, that Sinosteel has been integrated into Shanghai-headquartered China Baowu Steel Group Corp, or China Baowu, the world's largest steel conglomerate by sales revenue.

Approved by the State Council, China's Cabinet, the restructuring of Beijing-based Sinosteel as a part of China Baowu means it will no longer be a centrally administered State-owned enterprise under the supervision of the SASAC.

Founded in 1993, Sinosteel develops and processes metallurgical and mineral resources, metallurgical raw materials, trades in products, provides logistical services, offers related engineering technical services and operates equipment manufacturing businesses.

Sun Liancai, senior vice-president of Beijing Alliance PKU Management Consultants Ltd, said the restructuring of Sinosteel will strengthen the industrial chain resilience of China Baowu and boost the latter's steel production capacity and facilitate its goals of producing 200 million metric tons of crude steel annually by 2025.

With the SASAC's green light, China Baowu took Sinosteel into its stewardship in October 2020. China Baowu has been gradually integrating a number of local iron and steel companies such as Jiangxi province-based Xinyu Iron and Steel Group, Shanxi provincebased Taiyuan Iron and Steel Group, and Chongqing Iron and Steel Co Ltd.

The strong profitability of China Baowu will reinforce Sinosteel's earnings strength, said Zhang Tieshan of the marketing department of csesteel.com, a Shanghai-based e-commerce and trading platform.

Sinosteel's subsidiaries, spanning mining, engineering equipment, technical materials, trade and logistics assets management, will also enrich China Baowu's business portfolio, Zhang said.

With China's steel industry entering a new era of rapid development, the government is likely to take more restructuring and reorganization activities at SOEs in the coming years, said Wang Guoqing, research director at the Beijing Lange Steel Information Research Center.

With integration finding favor, the concentration of iron and steel capacities is a definite trend that will reduce disorderly competition and mitigate market price fluctuations, as well as ensuring the stability of steel prices, she said.

China's iron and steel industry delivered an impressive performance in 2021. Key large and medium-sized iron and steel companies reported a cumulative revenue of 6.93 trillion yuan ($993.8 billion), a year-on-year increase of 32.7 percent. Their total profits reached 352.4 billion yuan, rising 59.7 percent compared with a year before, data from the Beijing-based China Iron and Steel Association showed.

To enhance the country's steel competitiveness, the government issued a guideline earlier this year to promote the high-quality development of the iron and steel industry.

The policy document urged China's iron and steel industry to form a high-quality development pattern featuring reasonable layout and structure, stable supply of resources, advanced technical equipment, high-quality products and outstanding brands, as well as green, low-carbon and sustainable development by 2025.