China Baowu Steel to take control of stainless steelmaker Tisco

[BEIJING] China Baowu Steel Group, the country's top steelmaker, has agreed to take a controlling stake in stainless steel giant Taiyuan Iron & Steel (Group) Co, also known as Tisco, in a move to further consolidate the country's mammoth steel sector.

Baowu Group reached an agreement with Shanxi State-owned Capital Operation on Friday to take a 51 per cent stake in Tisco, according to a filing on the Shenzhen Stock Exchange by Shanxi Taigang Stainless Steel, a Tisco subsidiary.

The 51 per cent stake is worth 14.5 billion yuan (S$2.87 billion), based on an audit of Tisco's net assets, although Baowu will not pay anything for it, said the filing, in what is a state-backed restructuring move.

The deal will also make China's State-owned Assets Supervision and Administration Commission an indirect shareholder in Tisco via its 100 per cent ownership of Baowu, the statement said.

China, the world's biggest steel producing country, has been calling for consolidation in the industry in an effort to achieve orderly market competition and reduce emissions.

Since being created by a merger of Baoshan Iron & Steel and Wuhan Iron & Steel in 2016, Boaowu Group has acquired Maanshan Iron & Steel in 2019 and is aiming to take control of Chongqing Iron & Steel.

Taking a controlling stake in Tisco will help Baowu achieve a goal of producing 100 million tonnes of steel per year and "enhance its overall competitiveness in the stainless steel sector", Baowu said in a press release sent to Reuters.

"Tisco's stainless steel is used more in high-end products. The deal could give Baowu more influence over stainless steel pricing", in China which is currently dominated by Tsingshan, said an analyst who declined to be identified.

Tisco, China's second-biggest stainless steelmaker after Tsingshan Holding, has an annual steel capacity of 12.9 million tonnes, including 4.5 million tonnes of stainless steel.

The restructuring plan is still pending the state-asset regulator's approval and anti-monopoly review, Baowu Group said.

Shares of Taigang Stainless Steel were halted on Friday ahead of the announcement.

REUTERS