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China's top 10 steelmakers' output share hits 43% of total production

Highlights

Consolidation in industry gains pace

Latest acquisition from Rizhao Iron & Steel

The share of China's top ten steelmakers' crude steel output has increased to around 43% of the country's total steel production at the end of September, up 4 percentage points from the start of 2021, according to S&P Global Platts calculations based on transaction data announced over January through September.

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The rise in the output share came after a major steelmaker acquired a steel company based in northeastern China's Liaoning province in late September.

China had set a target to increase the ratio of the top 10 steelmakers' crude steel output to China's total output to 60% by 2025. The latest acquisition brought the industry closer to this target, which is also aimed at giving the country higher negotiating power for raw material prices.

In the last few months, the industry has witnessed mergers and acquisitions transactions gaining pace among major steelmakers in the country.

China's industry-wide targets also fueled the consolidation, with some market sources expecting the consolidation to gather pace in the next three to four years. This is also being backed by China's leading steel mills that are increasingly looking to raise their market share and improve margins in an increasingly competitive market.

Rizhao's acquisition

In the latest such development, privately-owned Rizhao Iron & Steel, headquartered in eastern China's Shandong province, completed the acquisition of Yingkou Medium Plate Co in late September.

The takeover elevated Rizhao Iron & Steel to being China's ninth largest steelmaker in terms of production volume, from twelfth previously.

Rizhao Iron & Steel produced 14.4 million mt of crude steel in 2020, while Yingkou Medium Plate Co. produced 7.8 million mt.

Some market sources said Fangda Iron & Steel, also a privately-owned steelmaker, had contacted Anyang Iron & Steel, in the Henan province, to explore cooperative agreements, and expected it to soon exceed Rizhao Iron & Steel in terms of production.

expected Fangda Iron & Steel, also a privately-owned steelmaker, to soon exceed Rizhao Iron & Steel in terms of production, as it had contacted Anyang Iron & Steel, in the Henan province, to explore consolidation opportunities.

Fangda Iron & Steel is China's tenth largest steelmaker, with a crude steel output of 19.6 million mt in 2020.

Industry consolidation crucial

In August, China's Anshan Iron & Steel's completed its merger with Benxi Iron & Steel in a transaction that had faced several hurdles since 2005. The transaction made Anshan Iron China's second-largest steelmaker and the world's third-largest.

After the merger of Anshan Iron and Benxi Iron, the combined crude steel production of China's top five steelmakers will account for around 27% of the country's total crude steel production, according to Platts calculations based on output data.

Some mill sources said mergers and acquisitions were crucial for all Chinese mills to survive in a highly competitive future, as domestic steel demand had almost plateaued amid slowing economic growth, while the efforts to reduce carbon emissions will keep raising the steelmakers' environmental protection costs.

In its bid to cap iron ore prices and meet China's ambitious decarbonization goals, the steel industry needs to consolidate to achieve synergies, some sources added. China's steel industry accounts for around 15%-20% of the country's annual carbon emissions.

China's steel industry consolidation: major acquisitions in 2021

April
Company
Acquisition target
Country rank after transaction
Liuzhou Iron & Steel
Guangxi Ferroalloy
11
July
Puyang Steel
Xingtai Iron & Steel
23
Baowu Group
Shandong Iron & Steel
1
Delong Group
Qian'an Jiujiang Wire Rod
6
August
Puyang Steel
Hongrong Iron & Steel
23
Shagang Group
Huixin Special Steel
4
Shagang Group
Huacheng Bosheng Steel
4
Anshan Iron & Steel
Benxi Iron & Steel
2
September
Rizhao Iron & Steel
Yingkou Medium Plate Co.
9
Source: M&A company data/announcements