Baosteel-Wuhan merger unlikely to cut steel industry's overcapacity

Shanghai

THE creation of a steel powerhouse may give China more clout abroad and is unlikely to address the overcapacity that's confounding the global market.

Shanghai Baosteel Group Corp and Wuhan Iron & Steel Group Corp have agreed to merge their listed units in a union that would create the nation's biggest mill and a company with the scale to rival ArcelorMittal SA. Analysts from National Australia Bank Ltd to China Merchants Futures Co see little chance of the deal resulting in capacity cuts while Kallanish Commodities said the companies are even planning to start up new, more efficient plants.

The fate of the global steel industry is hanging on the rate at which the world's biggest producer and consumer shuts the capacity it doesn't need. Prices collapsed to the lowest in at least nine years at the end of 2015 as China shipped its excess production overseas, prompting governments around the world to impose trade restrictions. US…