A POTENTIAL merger between Anshan Iron & Steel Group (Ansteel Group) and Benxi Iron & Steel Group (Ben Gang Group) is likely to make the new company one of the biggest steelmakers in the world, further cementing China’s dominance in the sector.

Ansteel, China’s No.4 steelmaker and Ben Gang, which ranks No.9, are both based in the northeastern province of Liaoning and discussions about a merger of the two companies have reportedly taken place since 2005, though were never finalized.

A revival of the talks comes amid a push to consolidate China’s mammoth, 1-billion-tons a year steel sector to focus on bigger, higher-quality producers.

Bengang Steel Plates, the listed arm of Ben Gang Group, said last week that the restructuring could result in a change to its ownership.

The restructuring is still at the planning stage and is subject to the approval of related government departments.

Ansteel was the world’s seventh-biggest steelmaker in 2019, with 39.2 million tons of output and Ben Gang was No. 19 with 16.2 million, according to data from the World Steel Association. A merger is likely to see them top Japan’s Nippon Steel Corp., whose output was 51.7 million, as the third-biggest in the world.

China’s biggest steelmaker China Baowu Steel Group Corp. has already embarked on a string of mergers, with combined group assets surpassing ArcelorMittal SA as the top global supplier.

In a five-year economic blueprint published in March, Liaoning’s provincial government proposed a joint restructuring of the two companies to make a “world-class steel firm.”

China, the world’s largest steel producer, is seeking to consolidate 60-70 percent of its steel capacity in the hands of its top 10 steelmakers over the next five years from around 37 percent now.

“We view the potential transaction as a positive trend toward rising merger and acquisitions in the steel sector, and expect further consolidation among the steel producers in the coming years,” analysts at Citigroup Inc. wrote. (SD-Agencies)