Baosteel Agrees To Acquire Desheng Nickel Industry.

In December 23rd,

The announcement shows that Baosteel Group intends to adopt a restructuring method of "equity granting + increase in registered capital", a one-time holding of 70% stake in Desheng nickel.

"In the past two years, the profitability of stainless steel is too poor. Baosteel's stainless steel business has been in a state of loss until this year, the losses will be realized. If the newly acquired stainless steel assets are injected into Baosteel, it may drag on Baosteel's performance."

Zhou Xizeng, a steel analyst at CITIC Securities, said: "so though competition will be generated, Baosteel still chooses to come forward by the group to restructure."

At present, Baosteel Group's stainless steel is mainly produced by Baosteel. According to its annual report 2009, the output of stainless steel is only 1 million 262 thousand tons in 2009, and the gross profit margin is only 0.57%. Meanwhile, the output of TISCO stainless steel is 2 million 479 thousand and 700 tons and the gross profit margin is 9.86%.

Zhou Xizeng believes that at present Baosteel's stainless steel business and special steel business are small in scale, low gross profit margin and lack of competitiveness. The reorganization of Desheng nickel industry will help improve the profitability of the stainless steel business in the long run, and can seize scarce resources ahead of time.

According to public information, Desheng nickel has 920 thousand tons of nickel alloy and 820 thousand tons of hot-rolled stainless steel strip per year. The two stage production line of 250 thousand tons of nickel, 15-40 tons of nickel alloy, 400 thousand tons of cold rolled stainless steel and 2 million tons of hot-rolled nickel alloy plate in the two phase is currently being prepared for construction. It also has 40% shares of Philippines Jiali Shi nickel Co., Ltd., the largest shareholder of the latter, and the latter owns about 1.5 billion tons of nickel mine.

"At present, many iron and steel enterprises are developing to the upstream of the industrial chain. Baosteel should look at the rich nickel resources of Desheng."

An industry insider told reporters.

Nickel is one of the most important raw materials for stainless steel production. Prices have soared and fluctuated in recent years.

In order to avoid the impact of raw material price fluctuations, Baosteel started the layout of nickel resources very early.

Up to now, Baosteel is the fourth largest shareholder of the Jinchuan group, the largest nickel producer in China. In the middle of 2008, it set up a joint venture with China Steel Group, the largest steel integrated service provider in China in the middle of 2008, to build and operate a nickel iron project with an annual output of 80 thousand tons in Cangzhou Bohai new area. At the same time, it was the eighth largest shareholder of 600432.SH, a listed company.

In addition to Baosteel Group, Anshan Group invested 157 million yuan in July 2010 to participate in the nickel industry, and became the third largest shareholder in the nickel industry, with a shareholding ratio of 1.2%.