China to promote M&A in the steel industry

China's steel industry is likely to lead the M&A campaign launched by the Ministry of Industry and Information Technology and joined by other 11 ministerial-level departments, sources said.

On Jan 22, the Ministry of Industry and the National Development and Reform Commission, along with other ministries, jointly issued guidelines to promote M&A deals among major industries such as auto, steel, cement, shipbuilding and healthcare.

According to a report on the Guangzhou-based 21st Century Business Herald on Tuesday, the steel industry may take the lead in the initiative.

The steel sector stocks index increased 1.59 percent on Monday, in one of the rare trading days when the index outperformed the broad market.

The Ministry of Industry set a restructuring target stating that by 2015, China's top 10 steel makers should have an aggregated capacity of 600 million tons, with each company able to produce at least 60 million tons a year.

Hebei Iron and Steel Group Co Ltd, China's largest steel maker by capacity, can only produce 45 million tons of steel per year.

According to the guidelines, by 2015, China's top 10 steel makers should produce about 60 percent of the nation's steel products, while three to five steel groups will be formed with key competitiveness and international influence responsibilities.

The guidelines also encourage steel firms to merge domestic mining resources and coking companies, as well as participate in the restructuring of scrap steel processing companies that have met environmental protection standards.