Steel Company Chongqing’s Savior

Chongqing Iron and Steel Corp a year and a half ago was on the verge of bankruptcy. And it survived in a deal it hailed as a remarkable example of how struggling state firms can go back to the top.

Currently, the oldest steelmaker of China became profitable and gained 616 yuan or $87.51 million in net income in 2019’s first six months.

Chongqing has some saviors. One of them is the Four Rivers Investment Management, a private equity fund that started in August 2017 by the biggest steel producer of China. And the biggest steel producer is the Baowu Iron and Steel Group or Baosteel. This firm wants to benefit from a state-driven consolidation of the industry.

In addition to that, the W.L. Ross & Co was also part of the fund. Wilbur Ross established this distressed asset specialist. He is also the U.S. commerce secretary who backed tariffs against producers of China. Then, the firm ran as a unit of Invesco since 2006. And Ross sold his shares last December 2017.

According to Four Rivers, the primary goal is to create the company an attractive takeover target. And by the end of the year, Baosteel will get the first refusal rights.

Zhou Zhuping, chairman of Four Rivers, stated, “Some in the West used to call steel a sunset industry.” However, Zhuping clarified that there is no such thing as a sunset industry. And as of now, it is still developing its assets.

Steel Industry of China

Aside from that, Baosteel and Four Rivers anticipate the steel industry of China to consolidate and rearrange. Moreover, Chongqing might benefit from the U.S. tariffs on steel, which would add pressure to those forces.

The oldest steel mill, founded in 1890, started during the war of China against Japan. And during that time, it moved to the Yangtze River port city of Chongqing to run away from invading troops.