Steel reorganization

Raising productivity is a key to revitalizing the country's steel industry, says an article on the Guangming Daily website. The following is an excerpt:

The recently-issued revitalization plan for the steel industry encourages the three major State-controlled steel enterprises to reorganize through acquisition and mergers and greatly increase their international competitiveness over the next three years.

The plan calls for forming several large steel groups by 2011, with annual productivity of more than 50 million tons, and some smaller steel groups.

But currently reality lags far behind such an ambitious plan. Industry experts predicted that 2008 would be a year of reorganization for the steel sector. But there was only a few successful mergers and acquisitions last year. Many groups reorganized only in name and continued operating separately.

China is the largest steel maker in the world but its top-four steel companies have a combined market share of less than 20 percent. Such a percentage is extremely low compared with other major steel-producing countries.

Industry leader Baoshan Iron & Steel Company became the country's largest some 20 years ago but has since restrained itself to the domestic market, passing up great international expansion opportunities that other companies, such as Nippon Steel, Arcelor and North America Steel Alliance, seized.

Mittal became the world's biggest steel company through a set of acquisitions and mergers.

Steel corporations in China are owned or controlled by different and sometimes conflicting interests, such as the central and local governments and private investors. Reorganization will have to overcome such ownership barriers.

(China Daily 03/02/2009 page2)