Chinese steel magnate calls for industry consolidation

Deng Qilin, the president of Wuhan Iron & Steel Group (SH: 600005), called for China’s steel industry to consolidate and improve its quality, the Wall Street Journal reported. Deng said the industry needs to focus more on manufacturing higher quality automotive steel, and that many firms need to consolidate operations to increase profits. China’s government has stated it wants to consolidate the country’s steel capacity so that China’s 10 largest steel producers would account for 60% of total output by 2015. Beijing has banned new steel projects before 2012 and issued legislation to close down small steel mills in a bid to spur such consolidation. The consolidation is mixed news for foreign steelmakers, who have previously been dismissive of China’s attempts to move up the value chain. However, many US, European and Japanese steelmakers are now acting defensively as Chinese competitors begin moving into higher-value steel product markets.