Chinese Government is planning to merge the Second biggest steel maker in China, Baosteel Group (5th in the world), and Wuhan iron and Steel corporation which is ranked 6th in China (11th in the world) According to the Wold Steel Association, Bao Steel and Wuhan Steel produced as 34,94 million MT and 25.78 million MT respectively.

Industry people said that it is a part of restructuring plan controlled by government to reduce over suppling and competition. After merging, it will become giant steel maker which can produce 60.72 million MT (3.6% of world output) and be ranked as 2nd biggest steel maker after ArcelorMittal which produced 97.14 million MT

Xu Xiangchun, Chief analyst at consultancy Mysteel Research said “The merger of Baosteel and Wuhan Steel fits with the government strategy of improving efficiency and reducing competition and overcapacity” However, on the other side mentions that it will be negative effect of credit for Bao Steel due to increasing its leverage.

Currently, steel industry is over supplying situation and it is necessary to reduce and restructure. Chinese’s steel output is about 50% as 822.8 million MT (total 1,669.9 million MT in the world) and it was one of main reasons to reduce steel market price and dumping war. Although those situation cannot be solve at this time, it is a good thing that steel industry has found a right way.