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September 25, 2018

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Looking up: a measure of business success

In a China famous for gleaming skyscrapers, China Baowu Steel Group can boast that up to seven of 10 super tall buildings are constructed with its steel.

In the Lujiazui area of Pudong, Shanghai’s financial heartland, China’s largest steelmaker provided the integral component in construction of the Shanghai World Financial Center, Shanghai Tower and the Jin Mao Tower, among other now famous buildings.

The company also boasts a role in bringing down the price of steel.

“In 2015, the price of steel was 1.8 yuan per kilogram, compared with the price of Chinese cabbage at 10 yuan per kilo,” said Chen Derong, chairman of Baowu. “How could that happen? It indicates that the cost efficiency of steel production has improved.”

The company is headquartered in the Expo area of Pudong, one of Shanghai’s most striking examples of modern development. In a sense, Baowu’s history has flowed from China’s rapid economic development over four decades.

In the late 1970s, when China was embarking on economic revitalization, the government authorized the founding of a large, integrated steel factory in Shanghai. It was called Baoshan Iron & Steel, and under state control it had access to the best engineers, technologies and government building projects.

Competition eventually emerged from both foreign and domestic rivals, and Baoshan was forced to expand into steel exports to buttress the bottom line. In 1998, the steelmaker absorbed the Shanghai Metallurgical Holding Group and came to be called Shanghai Baosteel Group. The new conglomerate was the largest steel producer in the country, with annual output of 20 million tons of steel.

In 2000, a subsidiary, Baoshan Iron & Steel, was formed to list on the Shanghai Stock Exchange. It raised 7.7 billion yuan (US$1.13 billion) in the initial public offering.

Baoshan’s growth also came from mergers and acquisitions amid a government-orchestrated industry consolidation. Its 2016 merger with Wuhan Iron & Steel gave the company its current name and created the world’s second-largest steelmaker.

Last year, Baowu reported operating revenue of more than 400 billion yuan, with net profit doubling to 14.2 billion yuan. Steel output was 70 million tons.

The company has been at the forefront of steel industry modernization that drove out unprofitable steelmakers, reduced excess capacity, encouraged consolidation and brought in the latest, most advanced technologies.

“In the past, steel was the apple of China’s eye,” said Chen. “We can recall when steelworkers always marched in National Day parades. However, times have changed. Nowadays, many people don’t want steelworks in their backyards because of pollution concerns. In fact, it’s an unfair assessment of Baowu.”

Indeed, “green” manufacturing has become a watchword of Baowu. The company has spent 450 million yuan on energy-saving technologies and 2.3 billion yuan on environmental protection programs.

The company’s high-end steel was much in demand when Lujiazui, sometimes called “the Wall Street of China,” was undergoing development. Baowu’s role in that development greatly enhanced the coffers and stature of the company.

“Pudong was fertile ground for the development of Baowu,” Chen said. “In 1998, we were one of the first group of state-owned enterprises to locate their headquarters there. Since then, we have benefited from the opportunities provided by Pudong. For example, thanks to favorable conditions brought about by the China (Shanghai) Pilot Free Trade Zone in Pudong, we were able to establish a trading platform for bulk commodities.”

The area of the 2010 Shanghai World Expo lies along core waterfront of central Shanghai — an area of finance, culture, tourism and eco-friendly communities.

“Services enterprises account for 91 percent of companies now in the area, nearly a third increase since 2016,” said Wu Hai, director of the Management Bureau of the Expo area.

Chronology of Baowu Steel history

1978: The construction of Baosteel started in Wusongkou, Shanghai.

1985: The first-stage project of Baosteel went into operation.

1992: Mintage steel produced by Baosteel’s rolling plant was used to make the first Chinese coin issued by the People’s Bank of China.

1998: Baosteel acquired and reorganized steel enterprises of Shanghai.

2002: The Majishan Port in Zhejiang Province built by Baosteel, which can guarantee imported iron ore, opened to service.

2007: Baosteel began its acquisition and reorganization of steel enterprises nationwide, acquiring Bayi Steel, Ningbo Steel and so on while implemented its “high-quality and large-scale” development strategy.

2016: China Baowu Steel Group Corporation Limited was set up on December 1, 2016.




 

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