China officially established a new national steelmaking leader - the world's second-largest manufacturer - on Thursday by merging two giant mills, as Beijing pushes consolidation in the industry to combat overcapacity. Shanghai-based Baosteel Group and Wuhan Iron and Steel Group, in the central province of Hubei, were combined to create China Baowu Steel Group, second only to Paris-listed ArcelorMittal.
Its birth was marked with a ceremony in Shanghai attended by top national government and company officials. The combined new entity will have total assets of 730 billion yuan ($105.9 billion) and 228,000 employees, a Baowu statement said. The two firms' combined steel topped 60 million tonnes last year, according to data from the World Steel Association, exceeding that of previous national leader Hesteel.
Baosteel, which had been China's No 2 steelmaker, has issued new stock to existing shareholders of Wuhan Iron and Steel to absorb the company. The new group's focus will be to "improve the international competitiveness" of China's steel industry, said Ma Guoqiang, Baowu's chairman. Chinese steel demand has slumped as economic growth slows and the global steel industry is hit by a glut. The crisis has seen manufacturers in Asia, Europe and the US suffer huge losses and led to political frictions between trading partners and accusations of dumping. Beijing has vowed to eliminate 100-150 million tonnes of capacity - out of a total of 1.2 billion tonnes - by 2020.
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