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Business deals

China's Ansteel and Ben Gang eye deal to create world No. 3 steelmaker

State pressure to prune crowded industry revives talk of long-shelved megamerger

Ansteel, China's No. 4 steelmaker, aims to expand its crude steel production capacity to 70 million tons per year.   © Reuters

DALIAN, China -- China's Ansteel Group Corporation and Ben Gang Group Corporation look to merge into what would be the world's third-biggest steelmaker by output, as Beijing pushes industry consolidation to cut excess capacity.

The potential deal to integrate the country's fourth- and ninth-largest steel companies, respectively, was announced by a listed unit of Ben Gang, which noted that the merger is still in the planning phases and will require regulatory approval.

China's government is encouraging a realignment of the country's crowded steel market, aiming both to address concerns about a potential glut and to reduce carbon dioxide emissions in a heavily polluting industry through consolidation of blast furnaces and other facilities.

But Ansteel and Ben Gang are a major part of the economy in their home province of Liaoning, and whether the merger would lead to any cutbacks remains unclear.

Ansteel churned out 39.2 million tons of crude steel in 2019, while Ben Gang produced 16.18 million tons, data from the World Steel Association shows. Ansteel aims to boost annual capacity to 70 million tons by 2025, according to China's official Xinhua news agency.

Ansteel and Ben Gang previously agreed to merge back in 2005, going as far as setting up a new entity for this purpose, but the partnership failed to move forward and was ultimately dissolved.

"Ben Gang, which was going to be absorbed, seems to have an allergy to Ansteel," said a steel industry source in Liaoning Province.

Crude steel output in China rose 5.2% to a record high of 1.05 billion tons last year. While the industry enjoyed brisk demand from the manufacturing and construction sectors, the government worries that excess supply could eventually drag down prices.

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