China's Baowu buys stake in TISCO, making a steel giant even larger

According to an announcement by TISCO's Shenzhen-listed arm, the Shanxi provincial government signed a strategic cooperation framework agreement with Baowu on Aug. 21 to acquire the stake. The Shanxi provincial government will retain the 49% balance.

The merger requires approval from the Assets Supervision and Administration Commission of the State Council. But market sources expect the deal to be approved soon, as the Chinese government has long been striving to consolidate its steel industry.

Baowu currently has a crude steel capacity of around 98.5 million mt/year, while TISCO has 12.94 million mt/year, of which 4.5 million mt/year is for stainless steel products.

Some market sources said Baowu's consolidation of China's steel industry would continue beyond its 111 million mt/year capacity. The sizable capacity will help Baowu to gain a bigger say in iron ore price negotiations, sources said.

Moreover, Baowu's consolidation of the major steelmakers in China will enable better management of steel production in the country.