Exploring The Future Integration Path Of Steel Industry

The effectiveness of integration depends in a sense on the policy direction of the state.

The determination of the government and the intensity of reform will bring about fruitful results of reform.

From the trend, foreign investment will enter China sooner or later. We must make a welcome welcome.

As a matter of fact, since 1997, the state has implemented "encouraging mergers, standardizing bankruptcy, laid-off diversion, and reducing efficiency". The integration of China's iron and steel industry has been in a short period of time since the start of joint reorganization in 95.

Through integration and the rapid development of China's economy, China's steel industry has developed rapidly in recent years.

Iron and steel output ranks first in the world in ten consecutive years. In 2005, China realized the pformation from a net importer of steel to a net exporter. In 2006 or 07 years, China has continuously become the world's largest steel exporter, producer and consumer.

The integration of the global steel industry can be traced back to the early nineteenth Century and early twentieth Century.

JP Morgan, the US financial magnate, annexed 785 small and medium-sized steel mills and merged them into the US Steel Corp, which made the world's first Super Company with assets exceeding US $1 billion, controlling 70% of the US steel output and opening the first large-scale industrial merger in the world.

In early 2000, the global steel industry started the fifth major consolidation.

By 2006, the total amount of mergers and acquisitions in the global steel industry will reach US $91 billion.

The United States, Japan and Europe have established a strong position in the global steel industry through acquisitions.

It is these important international experiences that make the global steel industry pay more attention to the effect of M & A and its growth.

In recent years, although the joint reorganization of domestic iron and steel industry has made some progress, its industrial concentration is still very low, and the characteristics of large number of enterprises and small scale have not changed fundamentally.

Especially in recent years, the rapid expansion of small and medium-sized iron and steel enterprises has made the proportion of large iron and steel enterprises continue to decline and industrial concentration has been further reduced.

Promoting joint reorganization and improving concentration degree become the key link to solve many problems in iron and steel industry.

In order to optimize the development, in 2005, the iron and steel industry development policy, which focused on improving the concentration ratio of iron and steel industry, was introduced.

According to the planning and prediction of the iron and steel industry development policy, by 2010, the concentration degree of iron and steel smelting enterprises will be greatly improved and the quantity will be reduced considerably. The proportion of steel production in the top ten steel enterprises in China will reach over 50% of the total output in the country, reaching 70% in 2020.

After 2005, the assets integration of domestic iron and steel enterprises speeded up.

Since then, more than 10 state-owned steel enterprises have been promoting joint reorganization.

The reorganization of Liusteel, Wuhan Iron and Steel Group, Benxi iron and steel joint reorganization, Tang Gang, Xuan Steel, Chenggang three major iron and Steel Group merged to set up the Hebei Tang Gang group, Baosteel has successively and Masteel, Xinjiang Bayi Iron and steel, Taiyuan iron and steel and Guangdong Shaoguan strategic alliance.

Not only the state-owned enterprises set off an upsurge of integration, but the two major private steel giants of Fosun Group and Shagang Group signed a strategic cooperation framework agreement in 2006, and also set a precedent for strategic cooperation between China's super large private iron and steel enterprises.

After a long run in, 3 years from 2005 to now, the industry has integrated intention or is experiencing sweet "love period" or "blossom and blossom".

In the process of integration, investors and capital markets are endless imagination.

However, before the consolidation of iron and steel enterprises, has there been any change to the profit growth after consolidation?

Did any of the previous expectations achieve results?

"From the perspective of integration effect, Baosteel's reorganization of Bayi Iron and steel company is the most successful case since 2005."

Nie Xiuxin, chief analyst of the Ping An Securities and iron and steel industry, said in an interview.

In June 18, 2007, Bayi Iron and steel announced that 48.46% of the state-owned shares owned by the Xinjiang SASAC owned by the SASAC will be pferred from Baosteel Group without charge.

As the first successful cross regional M & A in China's steel industry, Baosteel Group's reorganization of Bayi Iron and Steel Co. has been evaluated by experts as a landmark event, marking the substantial progress made in the asset restructuring of China's iron and steel enterprises across the region.

Through this integration, Baosteel Group has become the controlling shareholder and the actual controller of the Bayi Steel Group. The shares owned by the company are 313 million 195 thousand and 800 shares, accounting for 53.12% of the company's issued shares.

In the implementation of the global iron and steel M & amp; acquisition strategy, Mittal once admitted: "what we pursue is not scale, but profit."

International enterprises provide a reference standard for measuring the success of integration.

Then, after the Baoshan Iron and steel company integrated eight steel, what is the change of the company's profit situation?

At the beginning of the integration, the 81 iron and steel company had expected the company's net profit in the first half of 2007 will rise substantially, up by more than 50%.

The actual effect is that restructuring has made the development of both companies leap.

After the Baosteel Group became the actual controller of Bayi Steel, the profit growth of the company was obvious. In 2007, the net profit of Bayi Iron and steel company increased by 160% over the same period last year, and the net profit increased by more than 200% in the first half of 2008.

Although this is related to the high speed operation of the steel industry, the profit growth of the iron and steel industry in 2007 was only 45%. In 2008, the profit growth of the industry in the 1-5 months was only 26%.

Baosteel's successful reorganization of Bayi Steel has many reasons, but Nie Xiuxin believes that there are only two reasons for it.

The first is that the government led completely broke the regional barriers in the integration process; the second is that the integration scheme is effective and truly complementing and absorbing assets, business, technology and management.

From the point of view of product structure, Baoshan Iron and Steel Co., Ltd. is mainly based on plate and tube, while Bayi Steel is mainly made of long timber, and its production line has just been put into trial operation. From the regional market, Bayi Steel is located in Xinjiang, and its regional market is very obvious, far from Baosteel, and there is no overlap between terminal customers.

After the integration, Baosteel and Bayi Iron and steel formed substantial support.

Among them, Baosteel moves the plate production line to Bayi Steel, complementing the advantages of Baosteel to Bayi Steel. At the same time, Baosteel sends technical personnel to guide the board, which is undoubtedly one of the important reasons for the growth of Bayi's company, which is sensitive to gross margin.

Despite the success of Baosteel's reorganization of Bayi Steel, Nie Xiuxin, as an industry researcher, has shown more concern about the effectiveness of the integration of the steel industry.

"From a general point of view, the effect of integration is not as satisfactory as it is, and some people are wasting money, but not changing the soup.

Some of the restructuring is in name only, but only on the surface.

Before Baosteel integrated Bayi Steel, there were two enterprises that were restructured to be far ahead of Baoshan Iron and steel company. "Not only will they occupy the" Jiangshan "of more than 2/3 of Liaoning's steel output, but also will become the" new carrier "of China's steel industry.

This is the reorganization between Angang and Benxi steel.

Angang Group and Benxi Iron and steel group got the list of the first batch of 100 projects approved by the national development and Reform Commission as early as 2003 to revitalize the old industrial base in Northeast China.

Before the advent of Baosteel, Angang is not only the country's iron and steel industry leader, but also a symbol of China's heavy industry for a long time.

But all this has become a history because of the emergence of Baosteel and the rise of the Yangtze River Delta economic circle.

Anshan Iron and steel urgently needs to inject new resources and vitality.

So what's the effect of saddle's reorganization?

The new saddle iron and steel group was incorporated in Anshan, Liaoning province in August 8, 2005, announces the reorganization of Anshan Iron and Steel Group and Benxi Iron and steel group.

But the two sides are cooperative, and there is no equity relationship.

The group carries out unified management of the planning and development strategy, technological innovation and product development, international and domestic marketing strategy, and statistical declaration of member enterprises, so as to maintain the consistency of development strategy and decision making, unify the procurement policy of bulk raw materials, and unify import and export business and overseas raw material supply, and marketing coordination work.

After the merger and reorganization in 2006, the company's annual output ranked first in the country, reaching 22 million 560 thousand tons, surpassing the champion of Shanghai Baoshan Iron and steel company in 2005.

However, this leading position has not been maintained, and the output in 2007 has been overturned by Baosteel. Baosteel has won the first prize of the nation's output.

Then, why can't the integration effect of the saddle group be released or did not produce prominent results after the reorganization?

Angang and Benxi Iron and Steel Co located in Liaoning Province, the two products have a certain market competition relationship.

From the market point of view, a simple "1+1=2" situation has not been extended to the "1+1 2" situation.

When it comes to specific performance and data, Nie Xiuxin said: "in fact, there is no data to check the success and failure of saddle's because they are essentially a nominal restructuring."

In the more than two years since the sellar group's listing, the two companies are still making their own decisions, leading to integration.

Compared to Baosteel and Bayi's reorganization and the reorganization of Anshan Iron and Steel Group and Benxi Iron and Steel Co. Ltd., Nie Xiuxin, chief researcher of Ping An Securities and iron and steel industry, believes that there are four major differences.

The first is the difference between the two kinds of integration: substantive reorganization and nominal reorganization.

Before the whole reorganization starts, we should take into account the substantive issues in the reorganization, including products, markets, planning, expected targets and so on.

The two effect comes first from their different points of view.

Then, there are complementary and mutually exclusive differences between the buyers and the acquirers in terms of asset structure, resource advantages and development needs.

Secondly, although the integration of Baosteel and Bayi Steel is cross regional and the integration is more difficult, Baosteel has not sped up the capacity to make the market bigger, but rather focused on the healthy integration of the company's internal body.

Finally, Baosteel and Bayi Iron and steel group have maintained good execution after integration.

In technology support and management penetration, integration will fall into the real place and achieve the goal of real asset reorganization.

After buying with some Steel Corp that are likely to be bought, they may desperately try to sell a good price in the future. Bayi and Baosteel are all sinking down and doing their main business.

Are there any principles to be followed in the integration of iron and steel enterprises?

Nie Xiuxin believes that we should embody "several advantages" that are conducive to the realization of enterprise scale management, the enhancement of the concentration and risk resisting ability of enterprises, the realization of specialized production and operation of enterprises, the promotion of quality strategy, the promotion of the international competitiveness of enterprises, the improvement of technological progress in the industry, the co-ordination of planning, the elimination of backward and the prevention of duplication of construction, the standardization of the market, the prevention of product similarities and the price war, and the simultaneous growth of efficiency and efficiency of enterprises.

At present, there are more than 870 steel producing enterprises in China. In recent years, the joint reorganization has made some progress, but the industrial concentration has been further reduced.

The top 10 iron and steel enterprises accounted for 50% of the total steel output in 1998, but dropped to 35% by 2005.

In 2005, the total output of steel enterprises with a total output of more than 10 million tons was 105 million 410 thousand tons, accounting for only 29.62% of the total steel output in the country. In the year of 2005, the total output of steel was about 105 million 410 thousand tons.

At the present stage, the relevant policies of the state are inclined to merge and reorganize the domestic iron and steel enterprises. Why is the concentration ratio of China's iron and steel industry unable to be raised?

Nie Xiuxin, chief researcher of Ping An Securities and iron and steel industry, believes that the reasons are manifold.

In the final analysis, there are two reasons, one is the interest factor, the other is the institutional factor.

In the process of integration, there are many ways to express interests.

Interest is directly reflected in the "tax sharing system".

The tax sharing system divides all taxes into three categories: central government revenue, regional government revenue and central place sharing income.

In the process of cross province M & A, the interests of all levels should give in to the development needs of the enterprises themselves, but in reality, it is often difficult to balance them.

The biggest obstacle to cross regional mergers and acquisitions is local governments. If the iron and steel industry accounts for a considerable proportion of the industry, local governments will not give up easily. Conversely, it is easy to negotiate with the M & A.

"This needs to be promoted by means of administrative means and market restrictions."

Sometimes interest is reflected in the balance of personnel, mainly from the corporate leadership.

Integration inevitably involves conversion of personnel roles and duties. Although these problems can not be placed on the desktop, they lose their mental strength and executive power.

At the same time, interest is reflected in the handling of remaining problems.

At present, there are many problems left over by state-owned steel enterprises, such as the heavy burden of enterprises and auxiliary units, too many redundant employees and large collective problems.

The handling of legacy problems has also become one of the important obstacles to integration.

In addition, institutional obstacles constitute