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Merging: Breakthrough in Restructuring Steel Sector
Restructuring steel companies in Beijing, Tianjin and Hebei province is bound to affect all three areas and is fraught with problems. The businessmen at Shougang Group and Tangshan Group say that the major breakthrough in the restructuring of northern China's steel industry was the merger of Shougang and Tangshan.
A plan to restructure the steel industry was put forward early this year: establish a "north China steel group" company, and have the governments of Beijing, Tianjin and Hebei province be the shareholders of the group. The governments would put their enterprises into the group and the companies' income taxes would be paid according to a fixed percentage.
Two years ago, Shougang Steel reached a preliminary agreement to merge with Tangshan Steel. Since last year, because Shougang Steel's smoke and waste pollutes Beijing's environment, the calls for Shougang Steel to move have grown. Both companies reached a consensus on many problems concerning the merger. They think the restructuring should be implemented in stages and gradually expanded to other provinces in north China.
The union of the two companies can solve the problem of duplication since both produce ordinary construction steel material. Shougang Steel is located in Beijing; thus, it has the advantage of location and talented people. Its sales revenue from the non-steel industry has accounted for one half of its total sale earnings. Tangshan city has a solid industrial foundation. It is an important base for iron and coal production and is adjacent to Beijing, Tianjin and Jingtang harbor. It has planned to construct a steel production base for a long time. The Qianan iron mine is only twenty to thirty kilometers from Tangshan. After the merger, Shougang Steel can move some of its production equipment to Tangshan, developing Tangshan into a ten million ton level of steel base and simultaneously meet Beijing's special demands for environmental protection.
Luo Binsheng, president of Shougang Steel said after merger, the headquarters and technological development center should be located in Beijing to take the advantage of the talented people and location of Beijing. The production scale in Beijing should be cut down to focus on high-tech products and refined rolling steel. Part of the equipment will be moved to Tangshan where it will focus on the development of the steel industry.
Wang Tianyi, president and general manager of Tangshan Steel also commented on moving of part of Shougang Steel out of Beijing. He said, after the merger, if the main steel production equipment are moved to Tangshan, Tangshan will have the annual production capacity of 8 million tons of steel and 6 million tons of sheet steel, making construction steel material the main part of its product line. If Shougang Steel's number 1 steel mill and steel rolling mill are moved to Hebei Xuanhua Steel Co., this company can recover from being dead.
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