The joining together of two of China’s biggest steelmakers – Baosteel Group and Wuhan Iron and Steel Group – is proving to be good news for Baoshan Iron & Steel and Wuhan Iron and Steel Co.

Since the announcement of the planned merger both steelmakers have witnessed a revival in fortunes on the Shanghai Stock Exchange with Baoshan’s stock gaining 18% and Wuhan’s 21%.

The merger of the two parent companies will create the world’s second largest steel maker by crude steel output after Luxembourg-based ArcelorMittal, according to a report by Nikkei’s Asian Review.

The name of the merged business will be China Baowu Iron and Steel Group.

The key objective of the merger is to reform China’s state-owned steel companies and cut excess capacity, both of which have created serious cause for concern around the globe as Chinese steel has been dumped on nations around the world, resulting in plant closures and job losses.

According to Nikkei’s Asian Review, “Although doubts remain about whether the new entity can quickly shed overcapacity and trim its workforce, reducing the number of players in the market is expected to ease competition and the resulting overproduction and dumping.”

Source: Nikkei’s Asian Review.