China appointed the former president of Baoshan Iron & Steel Co. to chair the rival group Ansteel Group Corp., demonstrating its intention to merge the two parent companies and create a steel giant that would surpass ArcelorMittal as the largest producer in the world, according to people close to the subject. The shares of the divisions of the bundled groups fired.
The combination of both would help the parent company of Baoshan and China's largest producer, China Baowu Steel Group Corp., to achieve its goal of 100 million metric tons of annual production by 2021, and the government to fulfill its goal of concentrating the 60% of production in the hands of its 10 main plants by 2020, people said, who asked not to be identified because the information is not of a public nature, Bloomberg said.
The sources did not announce deadlines for the agreement and said the plan could still undergo changes
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Baoshan announced Monday that its president, Dai Zhihao, had resigned. The State Assets Supervision and Administration Commission (Sasac), which oversees both companies, said on Wednesday in his Weibo account that Dai would assume the highest executive position in Ansteel.
Ansteel Group is the third largest steelmaker in China, while Baowu itself is the product of a megafusion two years ago. Together, both companies produced 101 million tons of steel in 2017, according to the World Steel Association, about 4 million tons more than Arcelor. At the end of last year, combined revenues amounted to 493,000 million yuan (US $ 71,000 million), slightly above US $ 69,000 million from Arcelor.
China, the world's largest steel producer, has the general objective of improving the sector by controlling capacity, consolidating production and reducing pollution. Speculation about which companies could merge are frequent, and a report in September indicated that Baowu was in talks to acquire Magang Group Holding Co.
Sasac did not respond immediately to a fax where comments were requested. Shanghai-based Baowu spokespersons, and Ansteel, Anshan, Liaoning, said they had no knowledge of the merger plan and declined to make further comments.
Stocks in the listed divisions fired, reversing the previous losses; Baoshan rose up to 3.4% in Shanghai and Angang Steel Co., up 8.4% in Shenzhen. Shanghai Baosteel Packaging Co. Raise the maximum variation in the price allowed in the Shanghai stock exchange.
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