Two of China’s top steelmakers are expected to announce merger plans this week amid a global glut in the commodity.
State-owned Baosteel Group, China’s second-largest steelmaker, will absorb Wuhan Iron and Steel Group to create a new entity, Agence France-Presse said, citing a report from China Business News.
The deal is said to have been approved by the State-owned Assets Supervision and Administration Commission and submitted to the State Council for final approval.
The two firms are the world’s fifth and 11th largest respectively by production capacity. The new entity will be called China Baowu Iron and Steel Group, the report said.
China Securities Journal said the plan could be announced this week.
The combined capacity of the two firms reached 60.7 million tons last year, according to data from the World Steel Association, making the new entity the world’s second biggest producer behind ArcelorMittal.
Beijing aims to eliminate 100-150 million tons of capacity – out of a total of 1.2 billion tons – by 2020, AFP said.
Meanwhile, a court has declared Guangxi Nonferrous Metals Group Co. Ltd. bankrupt after it defaulted on a bond in February and missed a payment in April.
The intermediate court in Guangxi’s capital Nanning has ruled that the firm, owned by the Guangxi regional government, had failed to propose a court-ordered reorganization plan within a six-month window, Reuters reported.
As such, the restructuring period was brought to a close and the company was declared bankrupt, the court said.
In April Guangxi Nonferrous missed a payment on a 500 million yuan (US$77 million) three-year private placement note with a 5.56 percent coupon rated BB.
The company cited “consecutive losses and the fact that it has already entered bankruptcy reorganization procedures” as reasons for the missed payment.
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