Baosteel sees potential for stainless consolidation in China

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“We see lots of room for mergers and acquisitions,” Lu Ping, director of marketing said.

China’s top-three stainless producers account for only 45% of the country’s total capacity, whereas the USA’s majority market share is held by five players.

“Five years ago, there were no private stainless steel manufacturers in China,” Lu said.

Now, 44% of the industry is state owned, 39% privately owned and 17% involves joint ventures with foreign companies, he added.

But he said there will be obstacles to consolidation.

“It is difficult to merge central government-owned producers and provincial government-owned producers,” he said. “But it is even more difficult to consolidate privately owned and government-owned companies.”

The total production of stainless steel in China is expected to peak in five years, Lu said.

“The consumption and production of China’s stainless steel is turning to growing steadily, from growing rapidly,” he said.

In 2012, he expects China’s stainless steel capacity and consumption to grow by about 5%. This compares with a 30% average growth per year in the 1999-2007 period, and 12% growth in output in 2011.

Looking further afield, Baosteel is not looking to buy stainless mills in Europe that may be available at low valuations due to the difficult macro-economic environment, he said.

“We do not have any plans for buying [European stainless steel mills],” he said.