Chinese steel consolidation continues with Baowu's Kunming Iron & Steel takeover

As part of China's efforts to further consolidate its steel industry, China Baowu Steel Group Corp. Ltd., the country's largest steelmaker, acquired a 90% stake in state-owned Kunming Iron & Steel Holding Co. Ltd., based in the southwestern province of Yunnan.

Baowu signed an agreement with the target and the State-owned Assets Supervision and Administration Commission, or SASAC, of the provincial government of Yunan on Feb. 1, according to a same-day filing with the Shanghai Stock Exchange. Under the agreement, SASAC will transfer a 90% stake in Kunming Iron & Steel to Baowu for free and will retain the remaining 10% interest.

The equity transfer will be completed within six months, according to the filing.

Kunming Iron & Steel's total assets were worth 64.76 billion yuan as of the end of September 2020, S&P Capital IQ data showed. The group has an annual crude steel capacity of 8.27 million tonnes, according to a Feb. 2 report by Chinese media Caixin. The company also produces coking coal, titanium, stainless steel and gallium nitride. China Baowu said in a statement that it will speed up the product optimization of Kunming Iron & Steel and focus on building out its titanium production capacity into the largest in the country.

China Baowu became the largest steel producer in China by taking over Wuhan Iron & Steel (Group) Corp. in 2016. The group has continued acquiring steel capacity across the country, which is the world's largest steelmaker.

China churned out a record 1.05 billion tonnes of crude steel in 2020, with Baowu contributing more than 100 Mt.

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As of Feb. 2, $1 was equivalent to 6.46 yuan.