Baosteel Group Corp. and Wuhan Iron and Steel Corporation (WISCO), the two leading steel makers in China, are negotiating a possible merger that would create the nation's biggest producer.
On June 26, the listed entities of Baosteel and WISCO said in filings to the Shanghai Stock Exchange that they are planning a "strategic restructuring" with each other. Moreover, the companies applied for a trading suspension of their shares for five trading days since June 27.
According to the World Steel Association, the two companies had a combined market capitalization of $16.3 billion as of June 24. The potential merger may be the result of the Chinese government’s efforts to cut overcapacity in the enterprises with supply greatly exceeding demand.
China’s Minister of Human Resources and Social Security Yin Weimin said that the government expects a wave of job cuts of 1.8 million in coal and steel industries struggling with overcapacity.
In March 2016, Chairman of the National Development and Reform Committee of China Xu Shaoshi said that China will cut steel production by 100 million to 150 million tons and 500 million tons in coal production over the period of five years.
