Steel merger and listing plans pave way for industrial reforms

PUBLISHED : Wednesday, 19 November, 1997, 12:00am
UPDATED : Wednesday, 19 November, 1997, 12:00am

The Metallurgical Ministry will list two iron and steel giants in Hong Kong in the first half of next year and push through a series of mergers as part of a huge industry restructuring.

The China Daily reported Panzhihua Iron & Steel Co, with assets of $18.7 billion, was planning to sell a billion shares to finance an expansion of capacity.

It is said to be studying a dual listing in New York.

Wuhan Iron and Steel is also said to be planning a listing.

The model Handan steel plant in Hebei province recently merged with Wuyang Iron and Steel Factory.

The paper said large amounts of out-dated equipment would have to be scrapped and a number of poorly managed medium and small-sized steel-makers would be shut down over the next 15 years.

China has 1,600 steel-makers but only four have a capacity of more than five million tonnes, while 27 have a capacity of more than one million tonnes.

The ministry is co-operating with the China Securities Regulatory Commission to asses the qualifications of potential listing candidates.

Priority is being given to big enterprises which must use the capital raised on improving the quality and mix of their output.

Among the companies still vying for permission to raise capital abroad are Zhongqing Iron and Steel and Tianjin Steel Pipe.

Anshan New Steel listed earlier this month and on Monday issued 300 million domestic A shares.

Earlier this year, the Benxi Iron and Steel company issued B shares in Shenzhen.

Chongqing Iron & Steel became the first H-share company to be undersubscribed, with investors subscribing to only 77 per cent of its $700 million offering.

The industry is now in a desperate slump with domestic prices having fallen 5 per cent this year, while of the 801 steel firms in operation, 462 are in the red.

Last year, China became the world's top steel maker with output reaching 101 million tonnes.

But of this, as much as 80 per cent failed to reach international standards, with most steel-making technology dating back to the 1950s.

As much as 13 per cent is produced in energy-wasteful open-hearth furnaces so that overall energy consumption per tonne of steel is double that of Japan.


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