According to China Iron & Steel Association in a report released recently, competition in steel industry is set to heat up in the coming years alongside the new capacity utilization and the demand growth additions' abatement. As a result, mergers & acquisitions will become the major theme in next stage steel industry development, and most steel mills will be submerged in it.

In fact, the market weakness has forced steel mills to tie up with each other. Steel prices has posted 10 week losing streak, and dived an average of 12% in the first week after the National Day holiday, the biggest single week decline since 2000.

According to the report, steel mills can only strengthen their presence through capital injection, mergers and acquisition etc. Meanwhile, low steel consolidation rate also is a disadvantage in global contest, which has been well displayed in past years iron ore talks.

The report said that the M&A tides have formed or will be formed in many provinces and metropolis like Hebei, Shanghai, Beijing, Liaoning, Shandong, Jiangsu, Hebei, Chongqing, Sichuan, Shanxi and Inner Mongolia etc, where leading steel mills are consolidating local steel industry and involving in cross-regional mergers & acquisitions.

The report said that however, conflicts in taxation distribution, arrangement of employees and debts etc have sophisticated these cross-regional mergers & acquisitions, dragging down the whole consolidation progress. The successful material regrouping of Hebei Iron & Steel Group is a good example in these kinds of association. The rate-paying channels remain unchanged for its current enterprises, well balanced the benefit of different sides.

(Source: Securities Times)