Steelmaker expands overseas market
Updated: 2012-09-25 11:16
By Hu Haiyan in Zhangjiagang, Jiangsu (China Daily)
China's largest private steelmaker, Jiangsu Shagang Group, plans to open more overseas branches and conduct more mergers and acquisitions to expand its international market.
"Facing the faltering domestic market, one major goal for Shagang in the next 10 years is to tap the overseas market further," the group's chairman, Shen Wenrong, told China Daily in Zhangjiagang, East China's Jiangsu province.
Last year, the group gained an annual revenue of 207.5 billion yuan ($32.9 billion), a year-on-year increase of 16 percent, and is ranked 346th in the Fortune Global 500 for 2012.
Revenue from overseas markets constitutes 10 to 12 percent of total revenue, said Shen, and will rise to 15 percent by 2015.
Shagang exported about 5 percent of the nation's total exports of steel products in 2011, ranking it among the top three domestic producers.
"It is expected that the figure will stand at 10 to 15 percent by 2015," Shen added. Shagang will open more sales offices in Hong Kong and Singapore to expand its sales channels, and conduct more M&A in Europe and the United States, he said.
"Currently, because the competition in the EU and US is much more fierce than in Asia, Shagang will mainly develop our Southeast Asian market from now until 2015," he said. "After developing this market, we will mainly tap the European and US markets through mergers and acquisitions and cooperation with our potential partners.
"We are contacting some EU steel industry-related companies, which are very helpful to us in producing high-end products."
So far, the group has about 500 foreign clients. Its overseas assets totaled about 1 billion yuan last year, mainly located in Australia.
Shen said Shagang's global ambitions come at a time when the domestic market is sluggish.
"Because the development of domestic steel market is struggling now, it is urgent for us to tap the overseas market," Shen said.
According to the official website of China Iron and Steel Association (CISA), of the 81 steelmakers tracked, 38 recorded a loss in the first seven months of this year.
The losses totaled 16.9 billion yuan - 16.5 billion yuan more than the same period last year.
Shen, who is vice-chairman of CISA, said the industry had entered one of the most difficult times in its history, "the toughest period for us since our foundation in 1975".
He predicted the downturn will last until the first quarter of 2013. "In the past 30 years, stimulated by the fast development of China's economy and huge infrastructure and property investment, China's steel industry developed very fast," he said. "But this brought a negative effect, a severe overcapacity in this industry."
China's crude steel output was 500.49 million tons in 2008, but the figure stood at 683.88 million tons last year, rising by 36.64 percent within three years, according to Lange Steel Information Research Center, an industrial consultancy based in Beijing.
Shen said the slower development will force steelmakers to move up the value chain, instead of concentrating on volume.
Zhu Yijie, an analyst with Beijing-based Zero2IPO Group, said that domestic steel producers needed to focus more on technological innovation and on improving the quality of Chinese steel products. This would give them greater confidence to go overseas to increase market share.
However, Lu Jinyong, a professor at University of International Business and Economics, who specializes in foreign investment studies, warned it would be hard for steelmakers to find a fertile land overseas.
"When they step into foreign markets, they should have enough knowledge of the local markets. Otherwise they will encounter setbacks," Lu said.
Meanwhile, the Shagang group is investing 30 billion yuan to set up a steel logistics park in Zhangjiagang, aimed at "reducing transport costs and integrating the steel-related industries", Shen said.