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China has appointed the former chairman of Baoshan Iron & Steel Co. to head the rival group Ansteel Group Corp., thereby demonstrating its intention to merge the two parent companies and create a steel giant that would surpass ArcelorMittal as the world's leading producer. Shares of listed group divisions have skyrocketed.
The combination of the two will help Baoshan's parent company and China's largest producer, Baowu Steel Group Corp., reach its annual production target of 100 million metric tons by 2021, and the government achieve its goal Concentration of 60% of production in the hands of its top 10 plants by 2020, said the population, who asked not to be identified because the information is not public, Bloomberg said.
The sources did not reveal the deadlines for the agreement and said the plan could still undergo changes
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Baoshan announced Monday that its chairman, Dai Zhihao, had resigned. The State Asset Supervision and Administration Commission (Sasac), which oversees both companies, said Wednesday in its Weibo account that Dai would assume the management position at Ansteel.
Ansteel Group is the third largest steel company in China, while Baowu is the product of a mega fusion made two years ago. Together, the two companies produced 101 million tonnes of steel in 2017, according to the World Steel Association, about 4 million tonnes more than Arcelor. At the end of last year, their combined income amounted to 493 billion yuan ($ 71 billion), slightly above Arcelor's 69,000 million.
China, the world's largest steel producer, aims to improve the sector by controlling capacity, consolidating production and reducing pollution. Speculation about likely mergers is common, and a September report said Baowu was in talks to acquire Magang Group Holding Co.
Sasac did not immediately respond to a fax requesting comments. The spokesmen for Baowu, based in Shanghai, and Ansteel, Anshan, Liaoning, said they were unaware of the merger plan and declined to comment further.
Shares of listed divisions soared, reversing past losses; Baoshan reached 3.4% in Shanghai and Angang Steel Co., up 8.4% in Shenzhen. Shanghai Baosteel Packaging Co. has raised the maximum price variation allowed on the Shanghai Stock Exchange.
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