Chongqing Iron & Steel's 1 Billion Yuan Private Placement: The Financial Rescue Logic Behind It — Three Consecutive Years of Losses, Declining Production and Sales, and Strategic Passivity

Ask AI · Why does Chongqing Iron & Steel’s private placement for additional shares look passive amid a downturn in the industry?

On March 25, 3 Blue Whale News, Chongqing Iron & Steel Co., Ltd. released the “2025 Annual Private Placement of A-Share Stocks to Specific Investors (Application Draft) Offering Memorandum,” announcing that it plans to issue no more than 757,575,757 A-shares to Huabao Investment via a directed placement. The total fund-raising amount will not exceed RMB 1 billion, all of which will be used to replenish working capital and repay bank loans. This issuance still needs approval from the Shanghai Stock Exchange and registration approval from the China Securities Regulatory Commission, and it has already been approved by China Baowu and approved by the Hong Kong Securities and Futures Commission for an H-share clearing exemption.

Raising RMB 1.00 billion is, in essence, a financial remedial measure under the backdrop of three consecutive years of losses and declines in both production and sales

Although this private placement is branded as “supplementing working capital and repaying bank loans,” a close look at its background, motivations, and realistic basis shows that it is, in fact, a financial remedial measure chosen passively during a period of deep industry downturn—by a regional steel company with three consecutive years of losses, under pressure on its main business, and declines in both production and sales—rather than a capital operation with strategic initiative. Chongqing Iron & Steel is expected to post a net loss of RMB 2.50 billion to RMB 2.80 billion in 2025, continuing the track of three consecutive years of losses that began in 2022. In 2024, the sales volume of steel semi-finished products (commodity slabs/billets) fell to 7.5994 million tons.

In January 2025, the company published a profit warning, expecting that its full-year net profit attributable to shareholders of listed companies would be -RMB 2.80 billion to -RMB 2.50 billion, and the net profit after deducting non-recurring gains and losses also remains within a loss range of a similar scale. This figure is not an isolated case, but rather continues the consecutive loss pattern since 2022. Public information shows that in 2024, the sales volume of steel semi-finished products (commodity slabs/billets) was 7.5994 million tons, significantly lower than in previous years. Meanwhile, on an industry level, in 2024 the national crude steel output was 1.01B tons, down 1.37% year over year; the annual average of the steel price index CSPI fell to 102.47 points, down another 8.39% from 2023. Under the “three highs and three lows” pattern of high output, high costs, high exports, low demand, low prices, and low efficiency, as a regional long-process steel mill located in the southwest and far from major consumption markets, Chongqing Iron & Steel has weak pricing power, its cost transmission is blocked, and its profit margins have been continuously squeezed.

More concerning is that this private placement has an obviously pro-cyclical pricing mechanism. The offering price was set at 90% of the A-share average trading price over the 20 trading days before the pricing benchmark date, and was ultimately set at RMB 1.32 per share. Then on March 12, 2026, the company executed a block trade at RMB 1.54 per share, which was a 2.53% discount to the closing price of RMB 1.58 on that day. This means the private placement price offered a discount of 15.13% compared with the market’s most recent actual transaction price. Although regulators allow pricing under the rules, in the context of the company’s stock price lingering at a long-term low level and its market value continuing to shrink, delivering shares to related parties with a large discount objectively dilutes the interests of existing minority shareholders, yet it does not bring a clear business improvement path or any capacity-upgrade commitments. Across the entire offering memorandum, there is no mention of any new construction projects, technological transformation, or production-line upgrade plans, nor are there any funding-usage performance targets or assessment mechanisms. It only states, in general terms, “supplementing working capital and repaying bank loans,” lacking a verifiable logic of input-output.

Chongqing Iron & Steel still relies on the traditional blast furnace–basic oxygen furnace long process, without disclosing substantive investment in low-carbon metallurgy demonstration projects

From the perspective of national policy guidance for the industry, China is accelerating efforts to increase concentration in the steel industry and transition toward green and low-carbon development. The “Steel Industry Compliance Requirements (2025 Edition)” clearly require that full-process ultra-low-emission transformation be completed by 2026, and lists short-process steelmaking and hydrogen metallurgy as encouraged directions. However, Chongqing Iron & Steel still mainly uses the traditional blast furnace–basic oxygen furnace long process. In the first three quarters of 2025, its crude steel output declined by 2.89% year over year. Although the terminal end proportions of heavy plate and hot-rolled coil have increased, the process of increasing the share of steel grades from 10% to 50% relies more on structural adjustments than on breaking through technology barriers. The company’s currently owned 4100mm-wide heavy plate and 1780mm hot-rolled thin plate production lines do have some degree of differentiated capability, but they have not created an irreplaceable advantage in high-end supply. Within the Baowu system, Hubei Echeng Iron and Steel and Baoshan Steel Co., Ltd., among other leading firms, have already taken the lead in planning low-carbon metallurgy demonstration projects, while Chongqing Iron & Steel has yet to disclose similar substantive investments.

Terminating the absorption merger of Xinfang Long, exposing insufficient strategic focus and lack of integration capability in extended segments

In addition, the company’s corporate governance structure also shows characteristics of passive response. In December 2025, the board of directors reviewed and approved the plan for the private placement. But as early as March 2023, it had already initiated the absorption-merger process for its wholly owned subsidiary Xinfang Long, with the aim of lowering management costs. Two years later, in May 2025, the company unilaterally terminated the matter again, stating that “the professional qualifications held by Xinfang Long are beneficial for expanding supply-chain value-added businesses.” Such repeated adjustments reveal insufficient strategic focus, and also reflect that the company still lacks mature integration capabilities in extended segments such as logistics, warehousing, and multimodal transport. With its steel main business continuing to bleed, attempts to plug the gaps through the qualifications of subsidiaries are, in essence, defensive measures rather than proactive expansion based on a clear industrial logic.