Chinese Steel Merger Reported

Three of the largest steel producers in China have reportedly agreed to a merger in a move that would quickly consolidate steelmaking capacity in the northern Chinese province of Hebei.

According to a report on the International Herald Tribune Web site, Tangshan Iron and Steel has “agreed to merge with two smaller Chinese steel makers, Chengde Xinxin Vanadium and Titanium and Handan Iron and Steel.” All of the steel companies are based in the northern province of Hebei, which is identified as home to 20 percent of China’s steel production capacity.

The three are now part of the same business group, known as the Hebei Iron and Steel Group, and the news report speculates that the merger is a likely “first step toward listing all of the group’s major steel assets” as a publicly traded company.

The move fits into a national government strategy of urging steelmakers to merge as a way of retiring older facilities, intended not only to improve international competitiveness but also to cut carbon emissions and reduce energy consumption. Consolidation is also being urged to address potential overcapacity as the global economy slows.

The three Hebei companies produced more than 30 million tons of crude steel in 2007, according to the International Herald Tribune report. This would make it slightly larger than Shanghai-based Baosteel Group, which produced about 29 million tons that same year.