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The urgency of the merger and reorganization of iron and steel enterprises

Author: ZhangTian DuZhuoFang JinZuo From: www.yourpaper.net Posted: 2010-06-03 17:09:04 Read:
[Keywords] M & recombinant capital
[Abstract] steel is the lifeblood of a national manufacturing industry, as the world's largest steel producer and a major importer, China's domestic iron and steel industry opportunities and challenges in the circumstances are constantly searching for enhanced strength and expansion of iron and steel enterprises steel development strategy and iron and steel enterprises mergers and acquisitions has become a strategy give the world the focus of attention.

1 high cost era
90% raw steel production in China from iron ore, iron ore is the lifeblood of iron and steel industry, iron ore supply is related to the industry security a major strategic issues.China's domestic iron ore although many, but the quality is low.At present, our country already dependent on imported iron ore reached more than 50%.In recent years the international ore prices rose sharply, not only erode the profits of the steel industry, but also through the cost transfer, put pressure on inflation in china.Plus the shipping fee of iron ore has been greatly improved, which brings to our country iron and steel industry and its downstream industry cost pressures it is self-evident.

The international iron ore prices soaring at the same time, China's domestic steel-related cost greatly increase.Among them, especially the coke prices since 2007 has been rapidly rising.Watch from the international market, in April 9, 2008, both Japan and Australia have issued a statement confirmed the coking coal prices rose 200% the results of the negotiations.Nippon Steel, JFE and Sumitomo Metal such as the three major Steel Corp said in a statement, agreed to accept the 2008-2009 fiscal year coking coal prices from $98 a ton to 300 dollars.As consumption per tonne of steel 500-600 kg coke coke in terms of cost calculation, about two into steel costs.As the main raw material of coke, coking coal prices will inevitably rise sharply increase in steel production costs.
International iron and steel industry, China's steel industry has entered a high cost era.

2 steel prices rising
With iron ore prices, steel prices will follow international.Since this year the global iron and steel enterprises to cope with rising costs generally raised prices substantially, rough statistics, the steel price increases have reached US $100-150 / ton.
Because our country is not completely open market, the domestic steel prices and international prices has been not in a horizontal line, the domestic steel prices far below the international steel prices.But with the rising cost of steel, domestic steel prices are gradually rising.Before the rise in iron ore prices, domestic steel prices have maintained a steady rising trend, only a year in 2007 rose by about 50% on average.
Since the first quarter of 2008, the domestic steel market prices in less than three months in succession have been raised three times since then, a total of more than 1000 yuan per ton price increase, more than 20% rose.
According to industry analysis, the steel price increases far exceed the cost of raw materials prices, to some extent, steel prices in the amplification effect of iron ore price rise, and the international steel prices above US $1000 / ton the day is not too distant when.
China's iron and steel industry into the high-cost, high price, high profit operation era.

The 3 international capital continually seek ways to enter the China Iron and steel industry
China is a large piece of cake, in other areas are, in the iron and steel industry is also.In recent years, international capital has been looking for ways to enter the China Iron and steel industry.The steel industry is one of the lifeblood of a country, if you let the entry of foreign capital, may lead to a fatal threat to national economy, so China has in this respect are strict gatekeeper.However, foreign capital will always find a way into.
By the end of 2007 to early 2008, there are two big foreign holding the quality of China's steel enterprises mergers and acquisitions.
The first example is Russia's second largest steel company Evraz group company in the private iron and steel enterprise group Delong holdings, holds 10% of the shares, and may further acquisition of Delong Holdings Limited 51% of the shares, thus indirectly holding the number of private steel enterprises in china.
Delong holdings headquarters is located in Beijing, mainly engaged in investment and development of mineral resources, iron and steel production, iron and steel trade and the field of iron and steel.Is China's first overseas listing in the private iron and steel enterprises.With many enterprises under.Delong steel capacity of 2300000 tons a year, though in China's iron and steel enterprises not ranked top 10, but it is the band steel in domestic leading enterprises and the lowest cost steel enterprises these years, quite good.
Delong has sold the stock for two reasons, one is because of funding equity transfer to solve the financing problem, the second is through with Evraz group cooperation to obtain stable iron ore resource-rich Russia's long-term agreement ore.
Another foreign M & A case is always on the first large iron and steel enterprises look at fiercely as a tiger does the Chinese steel companies Arcelor - Mittal group announced it had completed a comprehensive acquisition of Orient Group Holdings Limited, the next step will be to further acquisition of Oriental Group holding shareholder equity.
Through the acquisition of listed in Hong Kong, the eastern group, Arcelor - Mittal avoid cumbersome and strict procedures in China's steel enterprises, anti-monopoly investigation the current threshold is only relevant departments.Russia's Evraz group also uses the same strategy, will "curve" to enter the China Iron and steel industry.

4 private capital to survive the difficulties of
High profits of the steel industry in many years ago has attracted a lot of private capital to enter, the development so far, the domestic private iron and steel enterprises steel production accounted for about 40% of national output, become China's iron and steel industry an important force to play a decisive role.
However, private steel enterprises because of lack of capital, mostly smaller, as of 2007, production reached 150 tons more than the private steel enterprises less than 5.At the same time, due to defects in technology, equipment, as well as the lax implementation of industry standards, pollute the environment of most private steel enterprises to the surrounding area problem.At the same time, because of the scale of private steel enterprises small, to absorb rising costs and weak, with the continuous rise in iron ore prices, freight, coal price, their survival will become increasingly difficult.
For the present situation of steel enterprises scattered, countries must speed up the merger, reorganization, the coordination between enterprises, accelerate the pace of the survival of the fittest, a large number of small enterprises will be eliminated, so that the domestic iron and steel enterprises bigger and stronger, and optimize the product structure, to solve the problem of excess production capacity.According to the iron and steel industry development policy of national "eleven, five" period to eliminate backward production capacity 1 tons, most of which is the small size of the private steel enterprises.According to a rough estimate, after 3~5 years, there will be 30% or more of the private steel enterprises eliminated.The quality of some of them such as capital, Shagang, Jinxi, will be mergers and acquisitions.
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