On February 1, Yunnan Province and China Baowu signed a cooperation agreement to promote the joint reorganization of China Baowu and Kungang. According to the agreement, 90% equity in Kunming Steel held by the State owned Assets Supervision and Administration Commission of the State Council of Yunnan Province will be transferred to Baowu Group for free, while it will continue to hold only the remaining 10% equity in Kunming Steel. Assets Supervision and Administration Commission of Yunnan Province has also authorized Baowu Group to manage Kunming Steel for at most 12 months as parties will try their best to complete the equity transfer in six months. The goal of this cooperation is to increase production efficiency and to give full play to synergies and economies of scale to build a leading steel company in the southwest region
Formed in 1939, Kunming Iron and Steel had about CNY 65 billion of assets as of last September. Its core asset, Kunming Iron and Steel Joint Stock, which can make 8.3 million tonnes of crude steel a year, is Yunnan’s largest steelmaker. Kunming Iron and Steel mainly produces and processes pig iron, steel billets, wire rod, steel bars, sections, plates and other downstream products. Kunming Iron & Steel Holdings also operates asset management, modern logistics, building materials wholesale, and other businesses.
Over the past two years, Shanghai based Baowu has acquired Masteel Group, Taiyuan Iron and Steel Group and Chongqing Iron and Steel. It has also managed Sinosteel Group under trust and integrated steel companies in the Xinjiang Uygur Autonomous Region. Baowu is now the world’s largest steel producer and is likely to boost its capacity to 150 million tonnes a year.