Why is Baosteel and Wisco and Steel’s marriage mad for love?
The long-rumored merger and reorganization of Baosteel and Wuhan Iron and Steel have finally become a reality.
On June 26, Baosteel Co., Ltd. and Wuhan Iron(Wisco) and Steel Co., Ltd. both issued announcements stating that: Baosteel Group and Wuhan Iron and Steel Group are planning strategic restructuring matters, and in view of the major uncertainties in this matter, trading in the shares of the two listed companies will be suspended from today.
If calculated by output, the combined Baosteel and Wisco and Steel will have an annual crude steel production capacity of at least 60 million tons, becoming China’s No. 1 and No. 2 supergiant in the world, with a market share of 7.5%. “Steel” is ready to come out.
Both Baosteel Group and Wuhan Iron and Steel Group are central enterprises directly managed by the State-owned Assets Supervision and Administration Commission. The integration of the two enterprises indicates that the reform of state-owned enterprises will usher in an acceleration period. The right to speak in the world.
Stimulated by this news, steel stocks rose collectively in early trading. Anshan Iron and Steel Co., Ltd. and Xingang Co., Ltd. rose more than 5%, and Shougang, Hangzhou Iron and Steel Co., Ltd., and Hegang Co., Ltd. rose by more than 3%. Steel companies have enjoyed this rare benefit.
However, this benefit cannot conceal the fact that the “loss king” of Wuhan Iron and Steel’s two cities and Baosteel’s profits have fallen sharply, nor can it conceal the fact that listed steel companies are generally in a downturn and continue to lose money.
As Wuhan Iron and Steel does not have a stainless steel business, this integration has little impact on stainless steel.
However, there are many good examples in the stainless steel industry: Baosteel’s acquisition of Desheng Nickel, Lianshun’s acquisition of Everbright, Anshan Iron and Steel’s acquisition of Lianzhong, Baosteel’s acquisition of shares in Daming, Hongwang, and Qingshan cooperation, Fujian Hongwang, Yongjin, and Dingxin Technology The establishment of Fujian Yongjin; each marriage will arouse strong repercussions in the industry.
Through the above cases, it can be seen that the marriage of related enterprises implements the extension of the industrial chain, focusing on the complementary advantages of the enterprises. Through the integration and extension of the enterprise industrial chain, the complementary advantages of the cooperative enterprise are formed. One is to enhance the product structure, enhance service capabilities, and realize the value-added of the industry. The other is to integrate resources through cooperation, increase enterprise sales, and reduce enterprise operating costs. , Improve the ability to resist risks.
But generally speaking, the merged and reorganized companies have formed their own independent systems. After integration, whether 1+1>2 can be achieved depends on the specific operations. Once the integration is not in place, it will affect the development of both parties.
Stainless steel industry, today, the industry has completely shifted from a seller’s market to a buyer’s market, and the profits of stainless steel companies are pitifully low. For stainless steel companies and the entire industry, if they want to develop for a longer time, they must start from two aspects: improving efficiency and reducing costs. If you just want to expand the market share and form a certain monopoly after the merger, and then realize the profits of the enterprise, it is basically useless in the case of sluggish demand.
Baosteel and Wisco and Steel will not be the last marriage between steel companies, and there will be other companies behind the stainless steel industry. So how these companies are “mad for love” and how to integrate them, let us wait and see!