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Why rising profits spell trouble for consolidation in steel sector

Rising profit in China's steel mills may not always be a good thing - it could become another hurdle in the industry's efforts to consolidate. Profit in the country's iron and steel industry rose more than 30 percent last year to 170 billion yuan (US$21.8 billion), a historic high, according to the China Iron and Steel Association. Driven by the lucrative earnings picture, smaller steel manufacturers, usually led by regional governments, may be increasingly unwilling to participate in the nationwide industry restructuring. "Mergers and acquisitions always come easier when steel prices are low and mills' earnings are falling," said Gu Yaoqiang, a Haitong Securities analyst in Shanghai. "When earnings are good, a purchase is more difficult because buyers have to pay premiums." Trackback(0) TrackBack URI for this entry Comments (0) Subscribe to this comment's feed Show/Hide comments Write comment Show/Hide comment form Name Email Website Title Comment Write the displayed characters Add Comment Copyright 2007. All Rights Reserved.

 

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