Baos­teel paces China steel rein­ven­tion

China Daily (Canada) - - SHANGHAI - By LI YANG

liyang@chi­nadaily.com.cn

In­dus­trial trans­for­ma­tion is now a cen­tral task for China’s iron and steel in­dus­try. A com­bi­na­tion of back­ward tech­nol­ogy, bu­reau­cratic man­age­ment of the mostly state-owned iron and steel works, high iron ore prices that are con­trolled by ex­porters and mount­ing en­vi­ron­men­tal pres­sure has weak­ened the coun­try’s “back­bone” in­dus­try.

Com­pa­nies are adapt­ing to the chang­ing in­dus­try dy­nam­ics and Baos­teel, the largest steel com­pany in Shang­hai and the most lu­cra­tive steel firm in China, is a good ex­am­ple of this trans­for­ma­tion. The com­pany is ex­pand­ing into new sec­tors that are re­lated to mak­ing steel, which con­trib­utes to about 28 per­cent of the group’s to­tal profit. Out of 130,000 work­ers, nearly 50,000 are work­ing on new prod­ucts and ser­vices that in­clude re­source devel­op­ment, lo­gis­tics, auto-sheet man­u­fac­tur­ing, en­gi­neer­ingtech­ni­cal ser­vices, coal and chem­i­cal ap­pli­ca­tions, fi­nance and pro­duc­tion ser­vice.

“Baos­teel’s trans­for­ma­tion ef­forts bear rel­e­vance to the whole in­dus­tries,” said the Bei­jing-based China Iron and Steel As­so­ci­a­tion in an as­sess­ment of the com­pany.

The cen­tral govern­ment im­ported equip­ment from Ja­pan and con­structed Baos­teel in Shang­hai in 1978, af­ter the “cul­tural revo­lu­tion” (1966-76) ended, as an in­dus­trial sym­bol of China’s re­cov­ery from po­lit­i­cal move­ments.

Baos­teel now pro­duces about 5 per­cent of the steel out­put in China which to­tals about 1 bil­lion tons a year. Its net profit ac­counts for about 20 to 40 per­cent of the in­dus­try to­tal.

“De­vel­op­ing new in­dus­tries is to serve our main busi­ness,” noted Xu Lejiang, pres­i­dent of Baos­teel. “But we al­ways do the new in­dus­tries ac­cord­ing to their re­spec­tive laws of devel­op­ment. We will not do them well if we al­ways de­fine the new in­dus­tries as a sup­ple­men­tary busi­ness for mak­ing steel.”

Auto-sheet man­u­fac­tur­ing is a good ex­am­ple of Baos­teel’s new in­dus­try that Xu likes to dis­cuss.

China pro­duced 22.12 mil­lion au­to­mo­biles last year. Baos­teel sold 6.74 mil­lion tons of auto sheets for nearly 80 per­cent of the au­to­mo­biles pro­duced last year, of which 5.37 mil­lion tons are the more ad­vanced cold-rolling auto sheet, Baos­teel’s staple au­tosheet prod­uct. Baos­teel has more than 50 per­cent of the do­mes­tic cold-rolling auto sheet mar­ket.

Baos­teel pays spe­cial at­ten­tion to au­tomaker re­quire­ments for auto sheets at an early stage of auto pro­duc­tion, which is called EVI, or early ven­dor in­volve­ment. This strat­egy stems from Baos­teel’s early co­op­er­a­tion with the Changchun-based

Dev‘

elop­ing new in­dus­tries is to serve our main busi­ness. But we al­ways do the new in­dus­tries ac­cord­ing to their re­spec­tive laws of devel­op­ment. We will not do them well if we al­ways de­fine the new in­dus­tries as a sup­ple­men­tary busi­ness for mak­ing steel.” XU LEJIANG PRES­I­DENT OF BAOS­TEEL

First Au­to­mo­bile Work and Shang­hai Au­to­mo­tive In­dus­try Cor­po­ra­tion in the 1990s.

Baos­teel par­tic­i­pates in the au­tomak­ers’ de­sign­ing and mould- mak­ing pro­cesses di­rectly. To make the auto sheet lighter, stronger, and more en­vi­ron­men­tally friendly, Baos­teel has never stopped in­creas­ing re­search and devel­op­ment ef­forts.

Baos­teel’s auto sheet is more ex­pen­sive than the av­er­age price of its do­mes­tic com­peti­tors. But its prod­uct re­mains pop­u­lar among au­tomak­ers from home and abroad for its re­li­a­bil­ity and qual­ity, which helps au­tomak­ers save money.

Baos­teel is the only sup­plier of the first, sec­ond and third gen­er­a­tions of high-strength steel. It is also the only au­tosheet maker in China that can make hot-rolling acid­pick­ling sheets used in pas­sen­ger-car chas­sis and struc­tural parts, and cold-rolling, hot-gal­va­niz­ing, Zn-Fe al­loy and elec­tro gal­va­niz­ing auto sheets.

Baos­teel also builds a com­plete ma­te­rial data­base on all au­to­mo­bile steel parts in China.

“Although we are the largest auto sheet sup­plier in China, the tech­no­log­i­cal gap be­tween the world’s top auto sheet mak­ers in Ja­pan, South Korea and Europe, and Baos­teel re­mains wide. We can sat­isfy the var­i­ous kinds of de­mands in Chi­nese mar­ket, but for in­di­vid­ual cat­e­gory of ve­hi­cles, we still have a long way to go,” said Bao Ping, chief engi­neer of Baos­teel’s auto-sheet de­part­ment.

Baos­teel also trans­plants the EVI con­cept and tech­nolo­gies ac­cu­mu­lated in mak­ing auto sheet to other rel­e­vant busi­nesses like mak­ing sheet for house­hold ap­pli­ances, elec­tri­cal steel and metal wrap­pings.

“The auto sheet in­dus­try is a typ­i­cal ex­am­ple for Baos­teel’s trans­for­ma­tion and Baos­teel has suc­cess­fully joins in the value-mak­ing ac­tiv­i­ties of global sup­ply chains of rel­e­vant in­dus­tries,” said Ping.

Another in­no­va­tion that Baos­teel ini­ti­ated in China is the es­tab­lish­ment of an on­line plat­form in 2013 which is now de­vel­oped to be the largest on­line re­gional steel trade mar­ket in East China known as the Shang­hai Iron and Steel Trade Cen­ter.

Last year, the trade cen­ter’s trans­ac­tions were about 9.5 bil­lion yuan ($1.6 bil­lion) on nearly 4 mil­lion tons of steel that at­tracted 28,000 cus­tomers and 725 sup­pli­ers.

By 2018, 20 per­cent of Baos­teel’s prod­uct and ser­vice sales rev­enue will be traded through the on­line plat­form, which is open for all cus­tomers and sup­pli­ers in the in­dus­try.

“Serv­ing the cus­tomers’ long-term needs will bring us sus­tain­able rev­enue,” said Xu Lejiang. “The trans­for­ma­tion of man­u­fac­tur­ing in­dus­try lies in the chang­ing of its po­si­tion from self-cen­tered pro­duc­tion to cus­tomer-ori­ented ser­vices, and the devel­op­ment of in­for­ma­tion and net­work tech­nolo­gies should bol­ster the trans­for­ma­tion.”

Baos­teel also founded Baosight Soft­ware in 2000 to dig­i­tize and its steel pro­duc­tion.

“What Baosight Soft­ware does, to some ex­tent, is sim­i­lar to the con­cept of In­dus­try 4.0 a pro­posal by the Ger­man govern­ment that fea­tures com­put­er­i­za­tion of tra­di­tional in­dus­tries,” said He Chao, Baos­teel spokesman.

Thanks to the devel­op­ment of cloud com­put­ing, In­ter­netof-things and in­tel­li­gent man­u­fac­tur­ing in re­cent years, Baosight Soft­ware saw big­ger busi­ness op­por­tu­ni­ties from the con­struc­tion of smart cities and ur­ban­iza­tion in China.

Baosight Soft­ware now has nearly 20 branches in China, and its sales rev­enue hit 3.6 bil­lion yuan last year.

“That Baos­teel at­taches great im­por­tance to au­to­ma­tion of its in­dus­tries from the very begin­ning of its op­er­a­tion laid a solid foun­da­tion for Baosight Soft­ware’s growth to­day, com­pared with other com­peti­tors. Baos­teel’s in­volve­ment in in­fra­struc­ture con­struc­tion in a num­ber of na­tional projects also helps it to pen­e­trate into the thirsti­est mar­ket for ser­vice so­lu­tions,” he added.

“But the hard­ware parts re­main the most dif­fi­cult ob­sta­cles for Baosight in putting its soft­ware into prac­tice.”

As for its main busi­ness, Baos­teel set up two steel pro­duc­tion bases in Xin­jiang and Zhan­jiang of Guang­dong province in 2011 and this year.

“The Xin­jiang branch is to tap into the re­sources in the Cen­tral Asia and the Zhan­jiang branch is to make use of the con­ve­nient har­bors and sat­isfy the Pearl River Delta’s de­mands for steel,” said Xu Lejiang. Both the two fac­to­ries are to re­lo­cate the pro­duc­tiv­ity re­moved out of Shang­hai.

“The ten­sions from the in­dus­try and the en­vi­ron­ment leave Chi­nese iron and steel in­dus­try no choice but re­struc­tur­ing and re­lo­cat­ing its busi­nesses. The trans­for­ma­tion of Baos­teel is far from fin­ished. But I am con­fi­dent we are do­ing our best in the right di­rec­tion,” Xu noted.

The auto sheet work­shop in Baos­teel in Shang­hai. Baos­teel now pro­duces about 5 per­cent of the steel out­put in China.

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