Baowu, Mangang To Merge

Combined Steelmaker to Exceed US Steel Output

Chinese steelmakers China Baowu Steel Group and Magang Group are to merge, creating a giant group whose combined production exceeds that of the entire U.S. steel industry.
In a statement posted to the Shanghai Stock Exchange, Baowu will acquire a 51-percent stake in Magang along with a 45.54-percent stake in subsidary Maanshan Iron & Steel.

The move follows consolidation in the Chinese steel sector as U.S. tariffs have caused trade issues around the world. China previously announced its intention to place 60 percent of its national steel capacity in the hands of its top 10 producers by 2020.

Ranked as the world’s second-largest crude steel producer in 2017, Baowu has 65.39 million tonnes of output, according to the latest data from the World Steel Association, while Maanshan Steel is ranked 16th, with 19.71 million tonnes of output.

Combined crude steel output of 87 million tonnes last year would have placed the merged entity slightly ahead of total U.S. steel output of 86.6 million tonnes, according to World Steel Association data.

No. 1 Spot

Tariffs of 25 percent on steel imports and 10 percent on aluminum imports from China to the U.S. have dampened breakbulk demand as uncertainty has weakened consumption and project cargo demand. 

"This is a major step toward reaching the goal of 100 million tons a year," a source at Baowu told news agency Nikkei Asian Review. "We just need one more addition to the group to become the world's No. 1.”

Safeguards Ineffective
In Europe, pressure from steel tariffs is also impacting breakbulk demand with Lakshmi Mittal, chief executive of the world’s largest steelmaker ArcelorMittal, stating that EU safeguard measures “weren’t effective.”

“Further measures are urgently necessary given the import tariffs U.S. President Donald Trump has imposed on steel imports to the United States,” Mittal said.

Growing supply continues to be a problem in Europe, as steel originally earmarked for the U.S. is deflected to Europe, cooling demand and growing supply. Mittal estimates that imports into Europe have increased between 30 and 40 percent since 2017.