Urge to Merge hits China

Mergers and acquisitions becoming more common in China

Due to the chill in the market, some small private steel companies have become more interested in becoming part of a bigger organization.  During my recent visit to Tangshan City, I learned of a number of recent combinations.

• Tangshan Baoye Steel was acquired by Capital Steel.
• Jiujiang Steel and Songting Steel in Qianan City signed a contract to be acquired by Capital Steel.
• Huaxi Luanan North Steel in Luannan County merged with Tangshan Steel to form Tanggang Huaxi North Steel.
• Xinyi Steel in Fengfun District in Tangshan City has been acquired by Jinxi Steel This small private steel company that consists of two 450 cubic meter blast furnaces and some steel processing facilities went through a number of potential buyers before finalizing a sale.

If the steel market continues to pressure profits as we think is likely, more small private steel companies will find ways to be acquired by larger more capable companies.  A contact from the new Delong Steel in Laoting Lingang Industrial Park told me that some small steel companies are losing about 300 RMB ($44) per tonne.  This will definitely make them discontinue production or be bankrupt in the future.

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