China appointed former president of Baoshan Iron & Steel Co. to lead the competitor group Ansteel Group Corp, showed its intention to combine the two holding companies and create a steel giant that would surpass ArcelorMittal as the world's largest producer, according to people close to the subject. Shares from divisions of groups that are traded in general are increasing.
The combination of the two will help Baoshan holding company and China's largest producer Baowu Steel Group Corp achieve its goal of 100 million metric tons of annual production by 2021, and the government to fulfill its goal of concentrating 60% of production in the 10 main factories by 2020, said people people, who asked not to be identified as non-public information, said Bloomberg.
Sources did not disclose the deadline for the agreement and said the plan could still change
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Baoshan announced on Monday that his president, Dai Zhihao, had resigned. The State Asset Supervision and Administration Commission (Sasac), which oversees the two companies, said Wednesday on the Weibo account that Dai would take the top executive position at Ansteel.
Ansteel Group is the third largest steel company in China, while Baowu itself is a product of the mega merger two years ago. Together, the two companies produce 101 million tons of steel in 2017, according to the World Steel Association, around 4 million tons more than Arcelor. At the end of last year, their combined income was 493,000 million yuan (US $ 71,000 million), slightly above Arcelor's US $ 69,000 million.
China, the largest steel producer in the world, has a general goal to improve the sector by controlling capacity, consolidating production and reducing pollution. Speculation about which companies can be combined often occurs, and a report in September showed that Baowu was in talks to acquire Apprenticeship Group Holding Co.
Sasac did not immediately respond to the fax requesting comments. Spokesmen for Baowu, based in Shanghai, and Ansteel, Anshan, Liaoning, said they had no knowledge of the planned merger and declined to comment further.
Shares in registered divisions surged, reversing previous losses; Baoshan rose to 3.4% in Shanghai and Angang Steel Co., up 8.4% in Shenzhen. Shanghai Baosteel Packaging Co. increase the maximum price variation allowed on the Shanghai Stock Exchange.
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