This integrated operation represents a long-anticipated boon for its capital position and cost conservation, and will also grant the group a greater say in terms of pricing of steel sales and material purchases, said a recent report by the Founder Securities Co. Ltd., based in Zhejiang Province.

Bigger and stronger

Recognizing the pitfalls of fragmentation, the group is now forging even stronger bonds within itself than it was given credit for.

Right after the inauguration of its alliance, the group set up a new unified sales company and purchasing company in a bid to gain leverage with material suppliers and logistics providers. In addition, it strengthened coordination between corporate management, human resources and accounting.

The effective integrations have, so far, turned out to be the grease that has kept all the steel-making machines in gear. Since its establishment, the group has saved costs of more than 1 billion yuan ($146.3 million) so far—a much-needed cushion against financial shock, said Wang Yifang, HBIS Board Chairman, in an interview with the 21st Century Business Herald.

In tackling overcapacity, the merger was an obvious catalyst, too. For example, the CDVT held back on a long-awaited strategy to build a welding line of hot-rolled steel plates, since Tangsteel had already owned one.

As part of its green endeavors, the group also shut down three high-polluting blast furnaces and five lime kilns and, instead, moved up the value chain to focus on higher-end products like steel plates for welded gas cylinders.

But its biggest stride is believed to be the establishment of a united mining subsidiary that joined mining forces of both Tangsteel and Hansteel. For a resource-hungry steel behemoth, the implication can be profound. Hebei Province is bristling with rich resources of iron ores, vanadium and titanium—but most of them are yet to be fully developed, subjecting the group to heavy reliance on imports for 70 percent of its material supplies.

It had tried to secure resources from overseas by investing in the Australian mining company Aurox Resources Ltd. in October 2008, but the deal reportedly ran afoul of regulatory blocks.

In all, however, the concerted mining strength will continue to provide a floor under the long-term prospect of the group, said Zhao Xiang'e, an analyst with Shenyin and Wanguo Securities Co. Ltd.