(Yicai Global) Dec. 22 -- China Baowu Steel Group, the world's largest steelmaker by sales, has been approved to take over Sinosteel Group, the state assets regulator said yesterday, after coming under its supervision a little over two years ago.

Shanghai-based Baowu Steel took Sinosteel into its stewardship in October 2020, as the State-owned Assets Supervision and Administration Commission moved to further integrate the country’s steel industry. Baowu Steel was itself the result of the merger of Bao Steel and Wuhan Iron and Steel Group in 2016.

Sinosteel is a major provider of services, metallurgical raw materials, and manufacturing equipment. Founded in 1993, the firm suffered a debt repayment crisis in 2014, but managed to become profitable in 2017 after completing debt restructuring the previous year. It owns three listed companies and has the rights to ample mineral resources overseas.

The merger will boost Baowu Steel's overseas rights and interests, Wang Guoqing, director of the Lange Steel Research Center, told Yicai Global.

Sinosteel has iron ore, chromium, and nickel resources in countries such as China, Australia, Cameroon, South Africa, Zimbabwe, Indonesia, and the Philippines. Through its units, the company owns the world's largest chromium reserves, a key raw material used in stainless steel production.

Baowu Steel's supersized steel division will provide new and plentiful opportunities for Sinosteel, while the coordination and integration of the two in specific operations will no doubt help enhance Baowu Steel's overall competitive advantages, Wang said.

The downturn in the industry provides a key window for the integration and restructuring of enterprises in the sector, Wang noted, adding that the agglomeration of resources into industry giants such as Baowu Steel is unstoppable.

Through years of mergers and acquisitions, China’s steel firms are evolving into three types, a handful of behemoths such as Baowu Steel and Ansteel Group, leaders in their respective niche markets such as Citic Pacific Special Steel Group and Tsingshan Holding Group, and various small- and mid-sized steel mills, according to Fan Tiejun, head of the China Metallurgical Industry Planning and Research Institute.

Editors: Tang Shihua, Futura Costaglione