China steel sector merger could result in world's top producer

A merger between Chinese steelmakers Baowu and Magangset will create the world's top producer, with combined annual output exceeding that of the entire US, overtaking ArcelorMittal.

The move is a part of Beijing's plans to consolidate its fragmented steel sector so that the top 10 producers account for 60% of steel production, up from 35% at present.

In a filing with the Shanghai Stock Exchange, China Baowu Steel Group said it will buy a majority 51% stake in smaller producer Magang Steel, owned by Anhui Province's State-owned Assets Supervision and Administration Commission in order to boost its “international competitiveness”.

Baowu and Magangset produced 87m tonnes of crude steel last year, surpassing all of America's output of 86.6m tonnes. Following their tie-up, they could also become the largest steelmaker, ahead of ArcelorMittal, which produced 92.5m tonnes last year.

"This is a major step toward reaching the goal of 100 million tons a year," a Baowu source said. "We just need one more addition to the group to become the world's No. 1," the source said.

The value of the deal was not disclosed.