The merger was announced by China’s State-owned Assets Supervision and Administration Commission (SASAC) and arranged by the state. It comes as China strives to increase the international competitiveness of its companies by forcing mergers, including the high-profile US$26 billion union of two railway construction groups a year ago.
In a statement MCC said: “On December 8, SASAC published a notice on the website: ‘With the approval of the State Council, the China Metallurgical Group Corporation (the MCC Group) is entirely incorporated into and become a wholly-owned subsidiary of the China Minmetals Corporation (China Minmetals). The China Metallurgical Group Corporation will no longer be an enterprise directly supervised by SASAC.’
“This strategic reorganization between China Minmetals and the MCC Group conforms with the Central Party’s spirit of deepening the reform of state-owned enterprises and the total requirement of SASAC to deeply promote the state-owned economic layout and structural adjustment for the purpose of developing a stronger, better and larger world-leading metal and mining enterprise with international competitiveness.”
Minmetals was originally a metals trading company that helped newly communist China survive a US trade embargo in the 1950s. It has become one of China’s strongest mining groups with extensive holdings overseas, including the Las Bambas copper mine in Peru. Minmetals has 177,000 employees and revenues last year of more than $50 billion.
MCC, which has its origins in the rebuilding of the Anshan steel mill in communist-occupied Manchuria in the late 1940, has had a number of difficulties with its overseas projects, ranging from the Ramu nickel mine in Papua New Guinea to its role in the Aus$8 billion cost overrun at Citic’s Sino-Iron mine in Western Australia’s Pilbara region.
The merger takes place against a backdrop of falling commodity prices that have hit many Chinese metals groups hard. Minmetals’ main steel trading rival Sinosteel just averted a bond default in October while Chinalco may have to absorb loss-making aluminium smelters shed by China Power International in another merger organized by SASAC.