Employees of a metal materials company in Luoshe town, Huzhou, East China's Zhejiang Province weld a steel structure on January 20, 2022. Photo: cnsphoto

Chinese authorities released a guideline on Monday encouraging domestic steel mills to consolidate through mergers and acquisitions (M&As) to create world-class steel giants and accelerate the sector's high-quality development.

By relying on the dominant enterprises in the industry, one or two pilot enterprises in the fields of stainless steel, special steel, seamless steel pipe and other special items are expected to be cultivated, according to an official guideline.

M&As across different regions and ownership groups are encouraged to change the "fragmented" structure of the nation's iron and steel industry and enhance the endogenous power of enterprises.

In addition, financial institutions are urged to provide comprehensive financial services to iron and steel enterprises pursuing M&As, structural adjustments, transformations and upgrading.

To address concerns about a potential supply glut and reduce emissions in the heavily polluting industry, China is encouraging a realignment of the country's steel sector. From the beginning of the 14th Five-year Plan period (2021-25), China has been promoting green development to realize carbon neutrality by 2060.

In 2021, China's crude steel output was 1.03 billion tons, down 3 percent from a year earlier, data from the National Bureau of Statistics showed in January. It was the first year-on-year decline since 2016.

According to a plan released by the Ministry of Industry and Information Technology, by 2025, China will build a number of super-sized steel conglomerates, and the top 10 steel enterprises will account for 60 percent of the country's steel output.

In August last year, China's two major steelmakers - Ansteel and Ben Gang Group Corp - signed a deal to merge, creating the world's third-largest steelmaker. After the merger, Ansteel had an annual production capacity of 63 million tons of crude steel, ranking third in the world.

Global Times