Baosteel sets new output target

2005-09-21

Top management at Baosteel Group, China's largest steel manufacturer, unveiled their new development plan to increase output to 30 million tons of crude steel by the end of the year 2008. The information was released by Baosteel Group Chairwoman Xie Qihua at the 20th anniversary of company's official start of operations on Thursday. An Industrial analyst surnamed Wang pointed out that it will be fairly easy for Baosteel Group to realize the production target in the next three years with the current facilities and resources. According to an estimate by the group's General Manager Xu Changjiang, the group will turn out over 23 million tons of crude steel by the end of this year and the revenue of steel and related businesses will reach 120 billion yuan (US$14.48 billion). To fulfil such a plan by 2008, the group's strategic planning department says new production lines will not be built, but the group will invest in the capital market to purchase existing steel-manufacturing facilities in Shanghai and surrounding regions. However, with the ambition to shape the Baosteel Group into one of the world's leading steel manufacturers, its expansion plan will need more than mergers and acquisitions (M&A) in Shanghai and nearby regions, Wang believes. Wang add: "There are two major ways to expand Baosteel Group – conducting M&A projects here (in Shanghai) and constructing a new steel factory in China's southern regions, where the demand for iron products outstrips the total supply." Currently, the annual supply of steel products in South China's Guangdong Province is 7 million tons, with its total consumption surpassing 28 million tons. Sources revealed that Baosteel is applying to the relevant government departments to build a new steel factory in Zhanjiang, a coastal city in Guangdong. The management of the Baosteel Group has confirmed the Zhanjiang plan, but refused to give details. Some insiders believe that the annual production of the new Zhanjiang factory will reach 20 million tons at full capacity. There have also been reports that the Guangzhou Iron & Steel Co Ltd is in talks with Japan's steel giant JEF to construct a 10-million-ton capacity steel mill. But industry analysts believe it does not conform to the overall development policies for China's iron and steel sector. Executive Vice-President Luo Bingsheng of China Iron & Steel Association believes that in future blueprint for the sector, there will be four major steel giants across the country – the merger of Anshan Iron & Steel Corp and Benxi Iron & Steel Corp in China's northeastern region, merger of the Capital Iron & Steel Company and Tangshan Iron & Steel Company in northern region, the M&A projects based on Baosteel Group in eastern and southern region and the restructuring of Wuhan Iron & Steel Company in central-southern and southwestern region. Baosteel's plan in Zhanjiang therefore is highly likely to get approval, analysts said.