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Baowu in talks to take over Magang to create a global giant

Reuters, citing three sources familiar with the discussions, reported that top Chinese steelmaker China Baowu Steel Group is in talks to take over rival Magang Group, a deal that would help entrench the nation’s position as a serious competitor in global steel markets. The source said “The talks are yet to move beyond a preliminary stage. A deal would be very reasonable and normal. After all, the two companies are geographically close. It would be easy to collaborate and their products are complementary.”

The mega-marriage would sharply narrow Baowu’s gap with top-ranked international producer ArcelorMittal and would be a major step in Beijing’s drive to consolidate its bloated steel industry. Baowu and Magang’s combined steel output last year surpassed total US production.

It would mark the next big takeover in the country’s steel sector after Baowu, the world’s No 2 steelmaker, was created by Baosteel Group’s 2016 acquisition of Wuhan Iron and Steel

Magang is headquartered in Maanshan in East China’s Anhui Province, about four hours drive from Shanghai, where Baowu Group is based. Baowu mainly churns out flat steel products used in manufacturing, while Magang’s output is split between flat and long steel products, the latter used in construction. Baowu in 2017 produced 65.39 million tonnes of steel and Magang made 19.71 million tonnes. Their combined output of 85.1 million tonnes would be just 11.9 million tonnes below ArcelorMittal’s production last year and compares to the US total of 81.6 million tons. It would also put Baowu closer to its plan to expand its capacity to 100 million tonnes by 2021 from around 70 million tonnes currently.
Source : REUTERS
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