FOR CHINA’S STEEL “SUPER-TEN” ARE UNLIKELY TO BE ACHIEVED - MEPS
The Ministry of Industry and Information Technology (MIIT)
is to liaise with other ministries to formulate plans for consolidation of the
steel sector in China through mergers and acquisitions. The concept is to
eliminate backward production capacity, optimise steel distribution, provide
technology transfer and improve competitiveness – through mergers and
acquisitions. The time frame set is 2015. This is an almost impossible task.
The objective is for each of the top ten steel groups to each have a minimum of
60 million tonnes per year of production. MEPS estimates that, if it was to be
fulfilled, the “super-ten” would command around 70 percent of Chinese output –
up from near to 47 percent in 2012. It would appear that the concept is to bolt
companies together on a regional basis.
In 2010, MIIT was charged with developing a scheme for rationalising the steel
sector. At that time, the task was less onerous. The time frame was five years
and the industry was to be restructured with the top ten steel companies each
having, a minimum, 45 million tonnes of production capacity. Now, the bar has
Choosing the enterprises which provide the best fit of production facilities
will test the authorities. The amount of time that is required to bring
management systems into unison is a mammoth task. Moreover, working practices on
the shop floor would require a significant amount of attention.
The act of consolidation takes time and patience on all parties. The management
at steelmakers in Europe, Japan and North America have been suffering these
difficulties for decades. Making the initial decision is the easy part.
Translating the policy into practice is the biggest challenge. Many steel
industry executives have the scars to prove this.
Restructuring the steel sector will, clearly, be of great benefit. However, the
magnitude of the task is not to be underestimated. There are many pitfalls. One
of the most contentious issues will be the job losses that are likely to ensue.
Is the Chinese government ready for this type of problem? In China, this may be
easier to control than it was for the western countries which had to deal with
strikes and other industrial relations complications.
Another critical element of the proposal will be how to deal with integrating
the companies – some of which are in the private sector, and others in the
public sector. Could we be looking at privatisation schemes in China, similar to
those which started in Western Europe with British Steel in the 1980’s?
Source: MEPS China
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