China's Benxi Steel says it will not merge with Ansteel Group: chairman

BEIJING (Reuters) - China’s Benxi Steel Group will not merge with regional rival Ansteel Group, the chairman of Benxi Steel told Reuters on Wednesday, putting paid to long-running talk of a potential merger.

Benxi Steel and Ansteel are located in northeast China’s Liaoning province. Benxi is backed by the provincial government and Ansteel by Beijing.

The two steel groups have been reported to be in talks over a possible merger since 2005 as part of Liaoning’s efforts to mainstream and de-leverage its heavy industry.

“We have completely stopped the talks with Ansteel on a merger,” Chen Jizhuang, chairman of Benxi Steel, told Reuters on the sidelines of the country’s annual parliament congress. He did not elaborate.

Benxi Steel started reforms on a mixed ownership structure in September, which would allow the company to attract private capital while retaining control of the company.

“We could lower our debt by 10 percent and reduce financial costs by 2 billion yuan ($298 million) through the reform,” Chen said at the parliament congress.

Both are specialized in plate-making, especially cold-rolled coil and galvanized steel sheet used in the automobile industry.

Benxi Steel’s Hongkong-listed subsidiary Bengang Steel Plates reported net profit of 1.6 billion yuan in 2017, up 105 percent from 2016. It lost 3.3 billion in 2015.

Last year, China’s top private-owned steel firm Shagang Group bought indebted Dongbei Special Steel Group in Liaoning province, while Jianglong Group, also a privately owned company, acquired Xilin Steel Corp in the northernmost Heilongjiang province.

That consolidated steelmakers in the northeast, including Liaoning, Jilin and Heilongjiang, bringing all big steel companies with annual capacity more than 2 million tonnes, under the control of less than 10 owners.

China said it will continue to push for mergers and industrial consolidation in 2019, and aims to put 60 percent of national steel capacity in the hands of its top 10 producers by 2020, up from a third now.

Ansteel, with around 35 million tonnes annual steelmaking capacity, ranks No.4 by output in the country, while Benxi Steel, with 20 million tonnes capacity, is ranked No.9.

Reporting by Muyu Xu and Dominique Patton; Editing by Tom Hogue, Emelia Sithole-Matarise and David Evans