It is reported that Hebei Steel Group, the result of a merger of two local steel mills, Tangshan Iron and Steel and Handan Iron and Steel, intends to go ahead with the consolidation from raw materials purchasing, production and sales respectively.
The group has set up a mining subsidiary in last September in a bid to merge the mineral assets of its three listed subsidies. The ore mine of Chengde Xinxin Vanadium and Titanium, now part of the group, has already been transferred to the group for free. Moreover, Hebei Iron and Steel Group is in early talks with Australian iron ore prospector Aurox Resources to finance the Aurox's 6-million-tonne iron ore project in last Oct
Senior official of the group told 21st Century Business Herald that "Hebei Steel Group is set to look for raw materials overseas as it ramps up production and beefs up competitiveness. Three listed companies would focus on their own specialty after the merger. Tangshan Steel has an edge in medium plate production, and produces substantial tonnage of construction Steel. Handan Steel focuses on steel plate, while Chengde Steel's advantage lies in vanadium and titanium products. And the group plans to consolidate the sales departments of its three subsidies into a unified one to take up the marketing and sales of the whole group.
Nevertheless, three listed companies have their independent financial operation since the local government is reluctant to suffer the loss of great sum of tax revenue. However, analysts greeted the deal with skepticism and warned that consolidation in China's steel industry faced huge hurdles and would proceed slowly at best. They doubt the fate of the smaller mills of the group like Wuyang Steel, Xuhuan Steel, and how the Caofeidian project, a joint venture between Tangshan Steel and Shougang, would proceed.
The small mines controlled by the group are very scattered, thus, it would be a tough task to consolidate the fragmented mining assets in the future.
(Sourced from MySteel.net)
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