Baosteel's second reorganization of Guangdong steel experts or paving the way for the Zhanjiang project

After a lapse of three years, Baosteel Group re-established the Guangdong steel industry with another big move.

On August 22, Baosteel signed a reorganization framework agreement with the State-owned Assets Supervision and Administration Commission of Guangdong Province and the State-owned Assets Supervision and Administration Commission of Guangzhou City. According to the agreement, the Guangdong State-owned Assets Supervision and Administration Commission withdrew from the Guangdong Iron and Steel Group by way of unilateral reduction, and transferred 51% of the shares of the Handan Iron and Steel Group to Baosteel Group in an unpaid transfer. Guangzhou SASAC also ceased to invest in Guangdong Steel Group with the assets of Guangzhou Iron and Steel Group, which became a wholly-owned subsidiary of Baosteel Group.

Baosteel's restructuring costs reduced

Baosteel has a strong interest in restructuring Guangdong's steel industry and hopes to successfully start the Zhanjiang 10 million-ton steel project with the opportunity to restructure the Guangdong steel industry.

In June 2008, Baosteel Group and Guangdong State-owned Assets Supervision and Administration Commission and Guangzhou State-owned Assets Supervision and Administration Commission reached a restructuring plan: Guangdong Steel Group Co., Ltd. was established. Baosteel invested RMB 28,688 million in cash, and its shareholding ratio was 80%; Guangdong Province SASAC, Guangzhou City The State-owned Assets Supervision and Administration Commission contributed 7.172 billion yuan to the state-owned net assets of Guangdong Shaoguan Iron and Steel Group Co., Ltd. (hereinafter referred to as "Shangang Group") and Guangzhou Iron and Steel Enterprise Group Co., Ltd. (hereinafter referred to as "Guangzhou Iron and Steel Group"), with a total shareholding ratio of 20. %.

However, under the background of the delay in approval of the Zhanjiang project, Baosteel has not made any breakthrough in the substantial restructuring of two steel companies in Guangdong.

Due to the downturn in the steel industry, the latest financial report issued by Guangzhou Iron & Steel Co. shows that the company’s loss for the first half of the year was 129 million yuan. In December of last year, Guangzhou Iron & Steel Co., Ltd., which was in a difficult position, had to sell shell resources to Guangri Group.

According to the views of the National Development and Reform Commission, Baosteel reorganized the Guangdong steel industry, eliminated backward production capacity, and the restructured Guangdong Iron and Steel Group was the main construction subject of the Zhanjiang project and was a prerequisite for the Zhanjiang project to carry out its preliminary work.

Under the urgency of the situation, Baosteel and Guangdong have finally reached a major agreement. On the afternoon of August 22, Baosteel signed a reorganization framework agreement with the Guangdong State-owned Assets Supervision and Administration Commission and Guangzhou SASAC. The latter two companies withdrew from the Guangdong Iron and Steel Group, Guangdong Steel Group became a wholly-owned subsidiary of Baosteel; 51% of the Handan Iron and Steel Group Equity is allocated to Baosteel without compensation; another Fangfang Steel Group will gradually phase out its 1.5-million-ton steel production capacity in the urban area of ​​Guangzhou, and shut down its 2-million-ton Pearl River Steel Plant. The eliminated production capacity targets will be transferred to Zhanjiang project, the future Zhanjiang project will give priority to the placement of the staff of Guangzhou Steel.

According to this new agreement, Baosteel has obtained a 51% stake in Handan Iron and Steel Group at no charge; on the other hand, it does not need to directly participate in the restructuring of the loss-making Guangzhou Steel Group, and does not need to assume the debt of Guang Steel, but through the transfer of production capacity. , assisting in resettling employees, acquiring some equipment of Zhujiang Steel, etc.

“The new restructuring plan is a win-win situation. On the one hand, Baosteel has obtained control of Handan Iron and Steel at zero cost, reducing its burden of reorganization of Handan Iron and Steel and Guangzhou Iron and Steel, so that it has no worries in promoting the Zhanjiang project; on the other hand, On the surface, the Guangdong government has made a concession, but if it can promote the reorganization of the Guangdong steel industry, especially the launch of the Zhanjiang project, it will be beneficial to Guangdong in the long run.” Feng Gangyong, an analyst at GF Securities, interviewed the Nanfang Daily reporter Said.

Zhanjiang project is about to be approved?

After the news of Baosteel's second reorganization of the Guangdong steel industry, outsiders speculated that Baosteel's Zhanjiang project may soon be approved. Since this year, Baosteel and the Guangdong Provincial Government have repeatedly issued information to the outside world that the "pass for Baosteel Zhanjiang Project" is expected to be obtained during the year.

On April 1st, He Wenbo, the new chairman of Baosteel, released news that the Zhanjiang project “is expected to make new progress in the near future”; by May this year, He Wenbo also stated that the Zhanjiang Iron and Steel Project that has been waiting for the “Establishment Permit” will win this year. The construction was approved; on May 22, Baosteel Zhanjiang Iron & Steel Co., Ltd. was officially listed at the temporary office of Zhanjiang Jinhai Hotel. Zhu Xiaodan, executive vice governor of Guangdong Province, and Xu Lejiang, chairman of Baosteel Group, attended the unveiling ceremony. It is reported that as of now, Baosteel has invested 4 billion yuan in the Zhanjiang project for early demolition, dock construction and land leveling.

After delaying for more than three years, Baosteel restructured the Guangdong steel industry and suddenly took a substantial step. In the eyes of some people in the industry, it may indicate that Baosteel’s Zhanjiang project is about to get a “life permit” and the long-held Zhanjiang project is expected to be truly start up. However, relevant staff of the Handan Iron and Steel Group and the Guangzhou Iron and Steel Group said in an interview with reporters that they have not heard of this latest development.

"I am afraid this year is still difficult to be approved. It may take until 2012 or later." Feng Gangyong analyzed that at present, China's steel industry is still in a stage of overcapacity. Although the Zhanjiang project has eliminated some of its backward production capacity, it has thousands of capacity. At the 10,000-ton level, the National Development and Reform Commission will not allow it to be launched easily.