China’s second- and sixth-largest steelmakers by output have entered restructuring talks, which analysts say could presage a merger that would create the nation’s biggest mill, and a company with the scale to rival the likes of ArcelorMittal SA.
Trading was suspended in the listed units of state-run Shanghai Baosteel Group Corp. and Wuhan Iron & Steel Group Corp. as their parents discuss “strategic restructuring,” the companies said in statements on Sunday, without elaborating. The two companies had a combined market value of $16.3 billion as of Friday’s close, and capacity of more than 70 million metric tons. Analysts including those at Citigroup Inc. and Mysteel Research cited the news as heralding a potential merger of the companies.
The talks highlight China’s efforts to overhaul its inefficient state-run sector and bolster an economy headed for its slowest growth in decades. A deal between the two would be the biggest in China’s metals sector since December, when China Minmetals Corp., its biggest trader, agreed to buy a government-owned engineering and mining group, as the nation seeks to reduce overcapacity while creating globally competitive firms.
Full Content: Financial Times
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