Tianjin government is considering merging four steel makers into one large group with an annual capacity approaching Baosteel Group Corp, China's largest steel maker, as part of a government-backed plan to push for a consolidation in the industry, China Business News reported on April 13.

It is with a view to the consolidation and the streamlining of an integrated steel industry that the four companies would come together as one large integrated steel company.

Industry analysts say the plan is needed to transform a fragmented industry of small producers into one of fewer, but larger, units, so that steel makers will be better able to compete with larger rivals in Europe and America.

The consolidation will take place between Tinajin Tiantie Group, Tianjin Tiangang Group Corp, Tianjin Pipe Group Corp and Tianjin Metallurgy Group Corp, all the dominant players in the local market in Tianjin.

"Before the new company is set up, there will have to be a management reshuffle at the companies," said a source from Tianjin Tiantie Group Corp." The launch of the new company is slated to take place before May, but the timing is not yet sure".

In fact the consolidation was a previous brainchild of local government, and the plan announced by central government in January naturally helped to accelerate the process.

But it is not clear for the moment which company will take the lead in the merger, since local government and the companies involved have not yet buckled down and talked about the details.

Post-merger the consolidation will result in an annual production exceeding 20 million tons. The four companies will establish a new defined position in the market and avoid further internal competition.

Last month, Baosteel Group Corp. paid more than 2 billion yuan ($292 million) for a 56.15 percent stake in Ningbo Iron & Steel Co., setting off what is likely to be a wave of M&A in the industry.

According to the government's plan, major progress in restructuring the industry will follow the aim" to create a couple of big steel producers with annual output of more than 50 million tons, and several steel producers with annual output of 10 to 30 million tons by the end of 2011".

(China.org.cn by He Shan, April 13, 2009)