Creating an ideal steel company for the future

"For iron and steel enterprises, the current era is the worst," Chen Derong, president of Baosteel Group, said in May 2015. "Last year, the nation's steel production reached 820 million tons. Because of the overcapacity, the entire industry shows very small profits. Now is by far the winter period of the iron and steel industry, which requires transformation and upgrading of the industry's structure urgently."

Faced with overcapacity and tepid demand in China, in 2014 Baosteel still reached a profit of $952.9 million on $48.32 billion in revenue. During 2014, Baosteel produced 5.5 percent of the total production of China's steel industry.

Year 2014 and 2015 also marked the company's efforts to enhance its product competitiveness by developing an e-commerce platform, seeking technological innovation and securing its supply chain.

For its US market, as early as 1996 Baosteel established Baosteel America Inc in New Jersey. For its US customers, it has another sub-office in Los Angeles. Baosteel America Inc also rounds out its presence in the Americas with offices in Canada, Mexico and Brazil.

"We are providing high-tech products that the US market needs. Therefore, our products could be viewed as a good supplement to the US market," said Ye Meng, president of Baosteel America Inc, "We are following a high-end path in the US, and our major US clients are all having a long-term, stable and strategic partnership with us."

"However, quantities we exported to the US market are very limited because we are more focused on the Chinese domestic market", he added.

Unfortunately, Baosteel has had to face a host of challenges in global markets, although its marketing strategy is always clear: high-tech and end-user oriented with limited quantity. In June 2015, Mexico's Ministry of Economy concluded an antidumping investigation and imposed duties on imports of cold-rolled coil from China.

That same month, six major US steelmakers filed petitions with US government agencies, seeking antidumping and countervailing investigations on corrosion-resistant steel against five countries, including China. According to The Wall Street Journal, the US International Trade Commission would decide within 45 days whether US producers' business was sufficiently "injured" to merit duties. The Department of Commerce will issue a preliminary ruling by the end of 2015. The final rulings from both agencies are due by mid-2016.

Baosteel said that it would not accept the charge. It said that its main market is still China and the steel it exports to the US constitute only a very small quantity. What Baosteel sells to US customers are products with high-tech, which could not be obtained from US steelmakers at equivalent quality and grade specifications, the company said. Baosteel is making its case to the US International Trade Commission and the Commerce department .

Along with its high-end product oriented strategy, Baosteel is also developing its e-commerce platform. "We are going to increase the value of our products further through the Internet, building the steel service platform integrated with e-commerce, logistics, data, finance and technology," Xu Lejiang, chairman of Baosteel, said in 2015.

In May 2015, Baosteel broke new ground toward this goal by unveiling Ouyeel, an online-trading platform. Ouyeel allows steel producers, traders and storage operators to do business online. The whole operation is supported by Baosteel's services in logistics, finance, technology, materials, big data and global trade.

"We're not just doing e-commerce; we are establishing a whole steel production and service system," said Chen Derong, president of Baosteel and Ouyeel at the web service's launch event. "Ouyeel is only an interface, an entrance to the production and service system. We are transforming ourselves from a mere producer to a combination of both producer and service provider."

"Launching Ouyeel could be viewed as a transformation of Baosteel, and as a way to further expand our advantages," said Ye Meng, "Baosteel is not the only Chinese steelmaker to establish this online production and service system but we are by far the best."

There's still some fine-tuning to do on Ouyeel, however. Xu Guangan, manager of Masteel cargo center, said: "Baosteel should keep a low profile in Ouyeel and make this platform helpful to other steelmakers as well. Only in this way can other steelmakers make best use of their strengths and make our industry healthier."

In addition to providing products, Baosteel is also offering technological support to other regions. With years of great efforts, Baosteel has developed its own technologies for producing advanced new generation steels.

By enhancing strength and maintaining formability, the new generation ultra-high strength steel will enable car makers to develop light-weight, safer and energy-saving vehicles to meet high emission criteria.

High-grade Grain Oriented steel, which is also supported by one of Baosteel's new technologies, is the key to produce high-efficiency transformers to save more energy during the transportation of electricity. Baosteel is leaving its footprint on the history of the world's steel industry by contributing more and more new technologies.

According to Ye Meng, Baosteel has been actively involved in high-tech cooperation with local steel industries. Through collaboration, Baosteel and local companies can together push forward manufacturing businesses in local markets. And new technologies, products and markets would then thrive.

"The American market is an important region for us to practice this kind of collaboration in the future." said Ye.

Baosteel is always on the lookout for ways to source raw materials globally to sustain its supply chain.

In May 2015, Chinese Premier Li Keqiang visited Brazil and announced that China would invest up to $4 billion with Brazilian mining giant Vale for a project to produce 90 million tons of iron ore to be shipped directly to China at a favorable price. As China's second-largest steelmaker, Baosteel stands to benefit from the deal.

Australia and Brazil are the top two places where Baosteel is trying to acquire raw materials and invest. According to Li Xinchuang, executive vice-secretary general of the China Iron and Steel Association

Liu Yineng contributed to this story

(China Daily USA 09/04/2015 page2)