Application Of M & A And Restructuring In The Supply-side Reform Of The Steel Industry

As an important part of the national economy,the steel industry plays an important role in the healthy development of China’s economy.In 2018,the annual output value of steel was 4 trillion yuan,and the output value of China’s GDP in 2018 was 92 trillion yuan.Its output value accounts for about 4% of the value.In the past20 years,with the rapid development of China’s infrastructure construction and real estate,the output of China’s steel industry has been rapidly expanding.China’s steel companies are characterized by a large number and scattered production capacity,and steel products have excess capacity of primary steel products,but the supply of steel products with technological content is insufficient.Some precision steel products rely on imports,and the price of exported steel products is much lower than The price of imported steel products.In response to the large-scale loss of China’s steel companies,China has issued a series of policies to resolve excess steel production capacity.Since 2016,it has promoted the supply-side reform of the steel industry.Between 2016 and 2018,a total of 145 million tons of production capacity was compressed.The overcapacity situation in the industry has been eased,the supply and demand situation in the steel industry has improved,and corporate profits have begun to rise steadily.Over the past 100 years,there have been four large-scale steel mergers and acquisitions in the world,and the current steel giants have come from time to time mergers and acquisitions.In 2018,the crude steel output of Baowu Steel and Maanshan Iron & Steel was 67.43 million tons and 19.64 million tons respectively,ranking first and ninth in China’s steel rankings.The reorganization of the two has a great impact on China’s steel industry.The concentration of steel has increased significantly.It became the beginning of a new round of iron and steel enterprise mergers and acquisitions to reduce production capacity,and provided reference experience for the formation of a larger and larger scale iron and steel group mergers and acquisitions.This article takes Baowu’s reorganization of the Ma Steel Group as the research object.It first introduces the related concepts of mergers and acquisitions and supply-side reforms.Then,it analyzes the background of the reorganization and introduces the basic situation of the reorganization and the changes in equity situation.Finally,it analyzes the reasons for the reorganization of the two parties and the industry indicators after the reorganization of the two parties and the relevantindicators of the steel company itself.The motives for reorganization mainly include external and internal influences.The external motives are mainly overcapacity to promote the integration of the entire steel industry,national policies to promote the supply-side reform of the steel industry,and the volatility of iron ore prices in the international environment.And trade frictions.The internal motivation is mainly due to the profit-seeking nature of the enterprise itself.The increase in iron ore costs and the decline in steel product prices have led to operational difficulties and even losses.Regarding the effect after the reorganization,this article evaluates the impact of the reorganization on the industry and the impact of the steel company itself.The impact of restructuring on the industry is mainly explained by comparing the changes in the concentration of the steel industry before and after M & A and the changes in capacity utilization before and after M & A.The impact on the enterprise itself is mainly explained by the analysis of the scale effect of the enterprise before and after the merger and short-term performance analysis,and the effectiveness of the merger itself is illustrated by constructing a profitability model and comparing the excess cumulative returns of both parties before and after the merger.The specific impact of the M & A event itself on the supply-side reform of the steel industry is mainly explained by comparing the specific conditions of the steel company’s own capacity replacement and capacity removal before and after the merger.