When Will The Market Effect Of The Restructuring And Upgrading Of Steel Aircraft Carrier Become Prominent

    Since the joint restructuring of the central enterprise China Baowu in 2016, the growth of this "steel aircraft carrier" has never stopped. After the volume and scale achieved an order of magnitude growth and entered the "100 million tons of Baowu", the industry and the market are also observing the restructuring effect of the global leader.

    According to the latest news released by the Group, Chen Derong, Secretary of the Party Committee and Chairman of Baowu Group of China, said in a speech on February 24 that in recent years, with the expansion of Baowu's territory and the promotion of professional integration, the size and system capacity of all subsidiaries have increased by an order of magnitude, and have also formed a professional integration model of Baowu Group guided by the "one base and five yuan" strategy and based on the principle of "one enterprise, one industry, one enterprise".

     On the same day, China Baowu also officially launched the professional integration work of New Steel Group. On April 24, last year, New Steel (600782) announced that Jiangxi Guokong would transfer 51% of its shareholding in Xinyu Iron and Steel Group Co., Ltd. (hereinafter referred to as "New Steel Group") to Baowu for free. After the completion of this transfer, Baowu will indirectly control 44.81% of the shares of the company through Xingang Group and realize control over the company. The actual controller of the company will be changed from the State-owned Assets Supervision and Administration Commission of Jiangxi Province to the State-owned Assets Supervision and Administration Commission of the State Council.

    This means that Baowu will add new members. On November 9, 2022, the State-owned Assets Supervision and Administration Commission of the State Council formally approved the joint restructuring of Baowu and Xingang Group. The production capacity of New Steel is up to 10 million tons. In 2021, the steel output will exceed 10 million tons, the operating income will exceed 100 billion yuan, the per capita steel output will exceed 1000 tons, and the company's plate production capacity will reach 7 million tons/year, with a thickness of 0.28 mm-380 mm.

    On January 4 this year, the cadre conference of Xingang Group was held, marking that Baowu and Xingang formally entered a new stage of integration and integration from joint restructuring. At the meeting, Chen Derong stressed that the restructuring of Xingang was another major undertaking of Baowu in the field of industrial joint restructuring, and also the first joint restructuring project of steel after Baowu's strategic iteration and upgrading in 2022.

    China Baowu was jointly restructured from the former Baosteel Group Co., Ltd. and Wuhan Iron and Steel (Group) Co., Ltd., and was inaugurated on December 1, 2016. According to the World Steel Statistics 2022 released by the World Iron and Steel Association in June last year, China's Baowu crude steel output in 2021 was about 120 million tons, up 4.35% year on year, ranking first in the world for the second consecutive year; ArcelorMittal, which ranks second, will produce 79.26 million tons of crude steel in 2021. The 2023 annual working conference held at the beginning of February this year revealed that China Baowu's crude steel output reached 132 million tons last year, its operating revenue exceeded trillion yuan to 1.16 trillion yuan for the first time, and its total profit was 31.28 billion yuan.

    Following the "merger of Baosteel and Wuhan", China Baowu has been incorporated into Masteel Group, Taigang Group and Chongqing Iron and Steel, while hosting Sinosteel Group, integrating Xinjiang steel enterprises, working with Guangdong Province to establish China Baowu Zhongnan Iron and Steel, and hosting Kunming Iron and Steel. In July 2021, China Baowu announced plans to reorganize Shangang Group; In January 2022, it entrusted the steel pipe and other businesses of Baotou Steel Group; In April 2022, it was announced that Xingang Group would become a member of Baowu family. It is worth mentioning that at the end of last year, with the approval of the State Council, China Baowu and Sinosteel Group were restructured, and Sinosteel Group was integrated into China Baowu as a whole, and it was no longer directly supervised by the SASAC.

    An article published on the official website of "China Baowu" mentioned that it would continue to promote the joint restructuring with "100 million tons of Baowu" as a new starting point. Strive to reach 200 million tons of crude steel by 2025, achieve 15% of the global market share by 2035, and further improve the industrial concentration and market share.

    In his latest speech, Chen Derong made three key points on the joint restructuring. First, professional integration is an effective management principle for Baowu to deepen the joint restructuring. The vast majority of Baowu's enterprises came from the planned economy period, and in the past, they had a strong color of planned economy, "small and complete, large and complete", which brought a heavy burden to enterprises. We have specialized and integrated the scattered businesses in the past, integrated and coordinated on the basis of scale, and optimized management, so as to save more money than before. As a result, specialized subsidiaries are more competitive in the market segments, and can expand their business and make more money.               Finally, the company can also be more valuable in the capital market. Through these years of professional integration, we have really realized the benefits of it for the improvement and development of enterprise competitiveness. Professional integration has become the core competitiveness of Baowu. To be unswerving, it should also become the management principle and work discipline.

Secondly, the professional integration of Baowu needs to be further accelerated. This time, we will promote the business of "should be rectified but not rectified" in the past few years, and basically complete it within the year without leaving any tail. Long-term suspense will cause problems and loss of efficiency. In addition to the professional integration of diversified businesses, the focus of this year is to promote the professional integration of the steel sector.

   Third, professional integration is just the beginning. Much work needs to be done to bring synergy into play. The group company proposed "professional integration, platform operation, ecological coordination, and market-oriented development" several years ago. "One base and five elements", like the palm and fingers, can maximize the function of the hand by cooperating with each other. After the professional integration, each specialized subsidiary should devote more efforts to the platform construction, and the Corporate Governance Department should provide professional guidance.