Glut and loss in the time of steel fer­ment

China Daily (USA) - - BUSINESS | FOCUS - By XIN­HUA

Wear­ing a red hat and wav­ing a red flag, Jiang Qin, a woman in her 50s, now works to as­sist traf­fic po­lice, per­suad­ing pedes­tri­ans and bike rid­ers to obey traf­fic rules on a street in He­fei, cap­i­tal of An­hui prov­ince in East China.

Along with 5,000 others, Jiang was laid off late last year when Ma­gang (Group) Hold­ing Co shut down its He­fei steel plant, amid a na­tion­wide cam­paign to re­duce over­ca­pac­ity in the steel in­dus­try.

“It used to take me an hour and a half to get to work on crowded buses,” said Jiang. “Now, I work near my home, earn 1,500 yuan ($225) a month. I am happy with my newjob, be­cause the job at the plant was no longer ideal as I’mget­ting old,” she said.

Zhou Han­hua, 56, from Wuhan, cap­i­tal of Cen­tral China’sHubei prov­ince, has a sim­i­lar story to tell.

Laid off late last year from Wuhan Iron and Steel, Zhou is now a driver with Didi Chux­ing, China’s big­gest car-hail­ing ser­vice provider.

Be­sides his earn­ings from his newjob, Zhou still re­ceives around 1,000 yuan a month from Wuhan Iron and Steel. “My monthly in­come is now as much as I earned at the prime time ofWuhan Iron and Steel,” he said.

Ac­cord­ing to Didi, there are now 219,000 ex-steel work­ers work­ing for the com­pany across China. InWuhan alone, 7,000 Didi driv­ers used to work for Wuhan Iron and Steel.

It is al­right for some, but many of the laid-off work­ers are up­set and wor­ried about their fu­ture. Most are keen to try their luck in a new­ca­reer.

Young peo­ple no longer re­gard jobs at State-owned en­ter­prises or SOEs as “jobs for life”. SOE salaries have halved in real terms, said an­other Zhou, also a for­mer worker with Wuhan Iron and Steel.

“No­body knows how long it will take for the sec­tor to pick up again, if ever,” he said. “It would be much bet­ter to try to find a new­ca­reer.”

Wuhan city gov­ern­ment has or­ga­nized two job fairs this year with 500 em­ploy­ers of­fer­ing thou­sands of jobs. Wuhan Iron and Steel plans to cut an­other 10,000 jobs by De­cem­ber.

De­spite ev­ery pos­si­ble ef­fort to cut pro­duc­tion, China’s steel in­dus­try set a new monthly out­put record of 69.5 mil­lion tons in June.

“Many small steel mills re­sumed pro­duc­tion as prices rose in March and April,” said Gao Hai­jian, Ma­gang’s chair­man.

If small steel firms are not closed com­pletely, it will be dif­fi­cult to meet ca­pac­ity re­duc­tion tar­gets of 100 to 150 mil­lion tons by 2020, with 500,000 work­ers to be laid off.

This year alone, the coun­try plans to elim­i­nate 45 mil­lion tons with 180,000 work­ers set to be laid off, ac­cord­ing to Xu Shaoshi, head of the Na­tional Devel­op­ment and Re­form Com­mis­sion.

But ac­cord­ing to the Min­istry of In­dus­try and In­for­ma­tion Tech­nol­ogy, only 13 mil­lion tons were cut in the first half of the year, 30per­cent of the an­nual tar­get.

The NDRC, how­ever, has or­dered au­thor­i­ties to meet their tar­gets, warn­ing that fail­ure would lead to se­vere pun­ish­ment.

“A pro­por­tion of China’s steel mills do not meet en­vi­ron­men­tal stan­dards and should be shut down,” saidMa Guo­qiang, chair­man of Wuhan Iron and Steel.

With more merg­ers and ac­qui­si­tions, the steel sec­tor would run more ef­fi­ciently, said Chen Derong, pres­i­dent of Baos­teel Group.

Ma ofWuhan Iron and Steel said re­struc­tur­ing is a must in cut­ting ca­pac­ity and im­prov­ing ef­fi­ciency to cre­ate glob­ally com­pet­i­tive firms.

In 2015, more than half of China’s steel com­pa­nies re­ported to­tal losses of 65 bil­lion yuan. Once a profit en­gine for China, iron and steel boomed while in­fra­struc­ture in­vest­ment fed de­mand for com­modi­ties such as steel and ce­ment.

Now, as the econ­omy cools, the pro­duc­tion glut has be­come as bur­den­some as it was once boun­ti­ful.

Apart from ca­pac­ity cuts, steel firms are strug­gling up the value chain with higher value-added prod­ucts. Baos­teel sees the auto, nu­clear power and de­fense in­dus­tries as pos­si­ble al­ter­na­tives for the wan­ing con­struc­tion in­dus­try, said Chen.

Ma­gang plans to in­vest 7.7 bil­lion yuan to up­grade 10 pro­duc­tion lines. In 2014, it ac­quired a French com­pany to help it im­prove its prod­ucts and pen­e­trate the Euro­pean mar­ket.

Ma­gang also has sent 15 teams to learn from auto and home­ap­pli­ance­mak­ers to bet­ter un­der­stand what they need.

“We will clearly un­der­stand cus­tomers’ de­mands and this will help im­prove our com­pet­i­tive­ness,” saidGaoofMa­gang.

A pro­por­tion of China’s steel mills do not meet en­vi­ron­men­tal stan­dards and should be shut down.” Ma Guo­qiang, chair­man of Wuhan Iron and Steel

RAO GUOJUN / FOR CHINA DAILY

A worker ex­am­ines steel prod­ucts at a shipbuilding fac­tory in Chongqing.

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