my country's steel industry has low capacity concentration and high regional concentration. Under the pattern of dispersed enterprise production capacity and low industrial concentration, mergers and reorganizations have become a major trend of sustainable development of the industry.
01
China Steel Group is entrusted
On the evening of October 11, China Steel International (000928.SZ) and China Steel Tianyuan (002057.SZ) announced that the company received a notice from the controlling shareholder China China Steel Group Co., Ltd. (hereinafter referred to as "China Steel Group") on the same day, and learned that China Steel Group plans to be entrusted by Baowu Group, but the specific entrusted plan is still under negotiation.
China Steel Group Trusteeship Announcement
Announcement shows that the above-mentioned matters do not involve major asset restructuring matters of the company before the above-mentioned matters, nor will it have an impact on the company's normal production and operation activities.
It is worth noting that custody in the steel industry is not new.
As early as 2010, Hebei Steel was entrusted to manage the 100% equity of Xuangang Group and 53.12% equity of Wuyang Steel, which were held by the former two shareholders Tang Steel Group and Handan Steel Group , respectively.
Industry insiders told "Small Bonds Look at the Market" that the China Steel Group is entrusted by China Baowu, which can be regarded as a signal that the integration of the steel industry has accelerated again.
Due to the large-scale mergers and acquisitions and expansion over the years, China Steel Group has accumulated huge debts. After the steel industry entered a "cold winter", it was reported that it had overdue debts in 2014. Two years later, China Steel Group carried out debt restructuring and turned losses into profits the following year, but the financial leverage level remained high.
02
Debt crisis broke out
According to the official website, China Steel Group was established in 1993. It is a large multinational enterprise group that provides resources, technology and equipment integration services for the metallurgical industry, integrating mineral resources, engineering equipment, science and technology new materials, trade and logistics, and investment services.
China Steel Group has 65 subsidiaries, including two listed companies, China Steel International (000928.SZ) and China Steel Tianyuan (002057.SZ).
China Steel Group official website
From the perspective of equity structure, China Steel Group is a central enterprise supervised by the State-owned Assets Supervision and Administration Commission of the State Council, and the actual controller of the company is the State-owned Assets Supervision and Administration Commission of the State Council.
, China Steel Group, which started with iron ore trade, once took advantage of the rapid development of China's economy and the surge in commodity prices, and expanded from a simple steel trade service provider to the production, supply and sales links in the steel industry. Its business eventually ran through the entire industrial chain of the steel industry and became a "steel production-oriented service provider."
However, since 2012, the global steel market has been weak and fluctuated, the domestic economic growth rate has slowed downward demand, weak downstream demand for steel, and the contradiction between overcapacity is prominent, and the steel industry has entered a "cold winter".
In 2012 and 2013, China Steel Group's operating income fell by 16.7% and 6.19% respectively, with total profits reaching -2.884 billion and 135 million yuan respectively.
Operating income
As of the end of 2013, China Steel Group's total assets were 110.102 billion yuan, total liabilities were 103.352 billion yuan, and its net assets were only 6.75 billion yuan, and its asset-liability ratio was as high as 93.87%.
Assets and Liabilities
Among the 100 billion yuan debt of China Steel Group, the debt of financial institutions is nearly 75 billion yuan, involving more than 80 banks and other financial institutions at home and abroad, as well as some trust and financial leasing companies.
As the entire industry entered a trough, China Steel Group, which had previously expanded and extensively operated, has accumulated huge loan debts, and risk problems have been exposed in a concentrated manner, and the debt crisis is about to break out.
In September 2014, China Steel Group was exposed for the first time that its debt overdue storm was exposed.
In October of this year, China Steel Group's China Steel Co., Ltd., a subsidiary of China Steel Group, defaulted on interest payment of 2 billion yuan, and the bond was provided by China Steel Group with an unconditional irrevocable joint and several liability guarantee.
It is worth noting that the "10 China Steel Bond" default incident is the second debt default of a central enterprise and the first bond default incident of a Chinese steel enterprise.
In order to resolve the crisis, China Steel Group launched a debt restructuring in 2016.
In December 2016, six financial institutions including Bank of China , Bank of Communications, National Development Bank , Agricultural Bank of China, Export-Import Bank and Pudong Development Bank signed a debt restructuring agreement with China Steel Group to reorganize the debt rights of China Steel Group with a total principal and interest of more than 60 billion yuan.
China Steel Group's overall debt restructuring plan includes two parts: the debt restructuring plan and business restructuring plan: the debt restructuring plan adopts the "debt retained + convertible bond + conditional debt-to-equity conversion" model, and divides financial debt rights within the scope of the restructuring according to the recovery risk, taking into account the current and future development needs of the enterprise, design differentiated plans and implement them in two stages.
, China Steel Group, which completed its debt restructuring, then started its second entrepreneurship and turned losses into profits in 2017, achieving net profit of 140 million yuan; in 2018, it achieved revenue of 62.3 billion yuan and net profit of 180 million yuan.
"Small Debts Look at the Market" noticed that although the performance turned losses into profits, China Steel Group's financial leverage level was still high, with its debt-to-asset ratios of 103.14% and 98.3% respectively in 2017 and 2018.
Therefore, this custody will help improve the financial status of China Steel Group and more conducive to the capacity reduction and supply-side reform of the steel industry.
03
03
00 The largest central steel enterprise-China Baowu
Although China ranks third in the world in iron ore reserves, due to the relatively small proportion of iron ore that can be directly used for steel smelting, my country is also the world's largest iron ore importer and consumer.
Steel industry is a typical industry with low capacity concentration and high regional concentration. In the situation where the company's production capacity is dispersed and the industrial concentration is low, mergers and reorganizations have become a major trend of the industry's sustainable development.
At the end of 2016, due to serious overcapacity, domestic steel companies suffered large-scale losses. Baosteel Group and Wuhan Iron and Steel Group implemented a joint restructuring. "China Baowu" was born and became the world's largest steel company.
According to China Baowu's plan, its steel industry aims to "lead the development of the global steel industry", focusing on national supply-side structural reform and promoting national industrial structure adjustment, promoting the transformation and upgrading of China's steel industry, becoming China's first and world-leading fine steel manufacturing service provider.
Therefore, after its establishment, China Baowu's acquisitions and other operations in the steel industry chain have frequently appeared, many of which involve A-share companies.
Since 2019, the speed of mergers and reorganization of Baowu Group has been accelerating. After reorganizing Masteel Group , China Baowu captured Taigang Group and Chongqing Steel in August and September this year, with a total production capacity of 110 million tons, achieving the planning goal of "100 million tons of Baowu".
At present, China Baowu has a registered capital of 52.79 billion yuan, a total asset scale exceeds 880 billion yuan, a net asset of 405.804 billion yuan, and a debt-to-asset ratio of 53.91%.
In 2019, China Baowu achieved steel production of 95.46 million tons, achieved total operating income of 552.2 billion yuan, and achieved net profit attributable to shareholders of 20.044 billion yuan. It ranked first in the world in terms of operating scale and profitability, ranking 111th in the Fortune Global 500.
In July this year, Chen Derong, Secretary of the Party Committee and Chairman of China Baowu, clearly pointed out at the first half of the annual work meeting that we must adhere to the "three highs and two transformations" and surpass ourselves. In terms of "high market occupation", we will continue to implement the joint restructuring of the domestic steel industry and strive to implement this year.
Therefore, this custody of China Steel Group is an important step for China Baowu to reshape the steel industry structure. The steel industry is the area where China Baowu's assets are intensively deposited, it is the main carrier for its national industrial responsibility, and it is also its preferred target for its transformation from industrial operation to capital operation.
