- China steel consolidation driven by supply security concerns
- New merged entity may pursue hydrogen for decarbonization
Chinese state owned steel producer, Ansteel Group announced a takeover agreement for its smaller peer Bengang Group on August 19. The new merged entity will be the world’s third largest steel producer after Baowu Group and ArcelorMittal.
The merger is driven by China’s desire to consolidate domestic iron ore supply to improve supply security. China seeks to reduce reliance on iron ore imports, from 80% in 2020 to 55% by 2025. The combined domestic iron ore resources of Ansteel and Bengang are around 9.85 Bt. By 2025, Ansteel aims to raise annual iron ore production to 50 Mt from 40Mt in 2020 and annual steel production capacity to 70 Mt from 63Mt in 2020.
Ansteel will likely keep most of its carbon-intensive blast furnace capacity due to China’s focus on domestic supply security. As a result, BloombergNEF expects Ansteel will focus on decarbonization options more suitable for integrated steel mills such as using hydrogen and carbon capture, utilization and storage (CCUS).
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