What is the future of consolidation in China's steel industry?
China has long sought to accelerate the integration of its steel industry, aiming to combat overcapacity, promote modernisation, and enhance its bargaining power when purchasing iron ore. China had previously set some quantitative goals for steel industry concentration, though these proved challenging and were never achieved. The “Guiding Opinions on Promoting High-Quality Development of the Steel Industry” is a blueprint for China’s steel sector’s development and structure within the 14th Five-Year Plan, as announced in 2022. This guidance encourages leading companies to carry out consolidations to build several world-class super-large steel enterprise groups, with a particular focus on efficiency as well as scale. We believe that industry consolidation will accelerate over the next five to ten years due to policy support, the contraction of Chinese steel demand, and overcapacity within the steel sector.