BEIJING—Four Chinese steelmakers based in the growing port city of Tianjin agreed to combine forces and create a business that will be among China's top 10 steelmakers by production.
The new company, called Tianjin Bohai Iron & Steel Group Corp., comprises the operations of Tianjin Pipe (Group) Corp., Tianjin Iron & Steel Group, Tianjin Tiantie Metallurgy Group and Tianjin Metallurgy Group Co., the municipal government said in a statement posted on its website Wednesday.
Steel output from the four companies totaled around 21 million metric tons in 2009, putting the new entity among the country's 10 largest steelmakers, based on data from the China Iron and Steel Association.
The move is in line with Beijing's efforts over the years to consolidate its fragmented steel industry. But attempts have been slow because local governments, which enjoy tax revenue from regional steelmakers, have had difficulties in reaching agreements with each other.
However, the effort has gained greater urgency this year as the revamp of the steel industry, including culling outdated capacity and upgrading technology, has become critical to building a more sustainable, environmentally sound growth model for the Chinese economy.
China, the world's largest steel producer, has urged the domestic industry to consolidate both within and across China's regions. Beijing aims to have its top 10 steel producers control 60% of national steel capacity by 2015, up from 44% in 2009.
An official with one of the four companies said the Tianjin government had pushed for the merger for a while. He said the four companies have more clout when joined together. But, he added, for now the move won't impact daily operations at his company: "In the short term, we will still operate separately."
China has banned any new steel projects before 2012, so the most feasible route for Chinese steelmakers to become bigger is through mergers and acquisitions.
China's largest steelmaker by output, Hebei Iron & Steel Group, and its sixth-largest steelmaker, Shandong Iron & Steel Group, were each formed via the merger of two local medium-sized steelmakers.
Hebei-based Shougang Group, the seventh-largest steelmaker by output, is scheduled to sign an agreement Friday to take part in the restructuring of Tonghua Iron & Steel Group, the largest steelmaker in the northeastern province Jilin, a Shougang official said late Tuesday. He didn't elaborate.
Typically, a restructuring in the industry involves one steelmaker acquiring, in some form, a smaller firm.
The Ministry of Industry and Information Technology this week issued rules that would eliminate steel mills whose output in 2009 was less than one million tons, for the first time setting a threshold for the size of a steelmaker.
This indicates the government is intensifying efforts to control steel capacity and reduce carbon emissions growth. The threshold complements earlier-issued standards for production facilities.
The ministry has also asked manufacturers that produce less than 300,000 tons a year of high-end steel products to withdraw from the market.
