December 03, 2008

Steel consolidation in China to speed up – CISA

Mr Luo Bingsheng deputy director of CISA while speaking during Shandong Steel Group's unveiling ceremony yesterday said that "Steel consolidation in China would speed up as many enterprises are under negotiations."

Mr Luo said formation of Shandong Steel Group has accelerated the pace of Chinese steel industry's consolidation and is of major significance in raising the industry's concentration.

He said there are a host of steelmakers under talks about M&A. He said that “The big problem China's steel industry is faced with is allocation of productive force, moving steel industry toward coastal areas is a trend. To build modernized, new steel works on the coastal region can source iron ore resource at a lower cost in virtue of geographical advantages.”

Mr Luo said “Economics of scale is required by the industry. Through assets consolidation, resources can be better allocated and utilized, division of work rationalized, and enterprises competitiveness also sharpened. If China's steel concentration further increases, it will also gain a bigger say in purchasing of raw materials, especially iron ore.”

The state council lately approved prophase work of Fangchenggang and Zhanjiang projects, suggesting combination between Baosteel, Liuzhou Steel and Shaoguan Steel is expedited and an essential regrouping will happen between Wuhan Steel and Liuzhou Steel.