Steel sector shines again on capacity cuts
China’s iron and steel enterprises are increasingly tapping overseas markets, especially countries and regions involved in the Belt and Road Initiative, for new growth opportunities.
As a pioneer in pursuing international capacity cooperation, Hebei-based HBIS Group Co Ltd, one of China’s largest iron and steel manufacturers, has invested in more than 70 enterprises across the world, with combined overseas assets amounting to $7 billion, according to the company.
HBIS plans to build itself into a multinational steel behemoth with strong profits and a shining brand by the end of 2020, to compete in the global market.
It is eyeing annual overseas revenue of more than $20 billion, or more than 30 percent of its total sales, by then.
In 2016, HBIS bought Serbia’s largest steel mill Zelezara Smederevo for 46 million euros ($55 million). The takeover ended seven years of losses for the 106-year-old Smederevo, which has since been renamed HBIS Group Serbia Iron & Steel DOO.
HBIS has invested $120 million and sent 11 batches of around 200 technicians for the technological and product upgrading of Smederevo.
After more than five months, HBIS managed to turn around the loss-making Serbian steel plant into a profitable operation, reinforcing the view that its go-global strategy is yielding positive results.
Smederevo’s performance in 2017 was its strongest in recent years. The steel mill’s production capacity increased by 50 percent. It is contributing between 1 percent and 1.5 percent to Serbia’s GDP, according to HBIS.
“We want to make Smederevo a model project for cooperation with Central and Eastern Europe countries,” said Yu Yong, chairman of HBIS.
The company is building a new industrial park in Serbia as a manufacturing base and logistics hub for the European market.
Other steel companies have also stepped up efforts to seek overseas expansion and capacity cooperation.
In June 2017, Delong Holdings Ltd released its plan to build a stainless steel factory in the Morowali Industrial Park in Indonesia, the Jakarta Post reported.
With an investment of around $950 million, Delong planned to develop a stainless steel factory with a production capacity of 3.5 million tons to help meet the demand in eastern Indonesia.
“Countries involved in the Belt and Road Initiative are intensifying their infrastructure building and require large amounts of steel products, which can be met by Chinese steel producers,” said Wang Guoqing, research director at the Lange Steel Information Research Center.
In recent years, more Chinese steel enterprises began to set up plants in economies involved in the B&R initiative, instead of simple technological exports and project cooperation as they did in the past, Wang said.
She also cautioned that Chinese steel companies should carefully study local policies, especially environmental policies, before making the investment.
We want to make Smederevo a model project for cooperation with Central and Eastern Europe countries.” Yu Yong, chairman of HBIS