Rongcheng Steel Zhang Xiangqing: Small steel mills need to survive

Rongcheng Steel Zhang Xiangqing: Small steel mills need to survive

    A year ago, Zhang Xiangqing, an orphan of the Tangshan earthquake who became famous for donating 100 million yuan after the May 12 earthquake, is now reluctant to refer more to that donation. Zhang Xiangqing said: " I now have more important things to do. "

    The head of this privately-owned steel company is now facing a severe market test . On the one hand, it is the large-scale reorganization of large state-owned steel companies. On the other hand, the financial crisis has made the steel business increasingly difficult to do.

    In Tianjin City, under which Zhang Xiangqing’s Tianjin Rongcheng United Steel Group Co., Ltd. ( hereinafter referred to as “ Rongcheng Steel ”) is located, it is preparing for the reorganization of the four major state-owned steel enterprises in Tianjin. The neighboring China's largest producer of steel, the Hebei Iron and Steel Group, has been set up, and private steel companies in the Tangshan region have even joined forces.

On April 13th , the private entrepreneur who had just entered an innocent age said in an exclusive interview with a CBN reporter that if it does not change, small steel mills may face a survival crisis in the future.

CBN : Since the donation last year, what happened to the company's development?

    Zhang Xiangqing: The efficiency of the company in the first half of last year was very good, but the market would not succeed in the second half of the year. The price of raw fuel is very high, but the demand cannot keep up, leading to a sharp drop in steel prices and a huge impact on profits. As a member of the market, Rongcheng Steel is no exception.

    In spite of this, the company still achieved sales revenue of 30 billion yuan in 2008 , and profits and taxes of 1.15 billion yuan. In 2007 , the sales revenue of Rongcheng Iron and Steel was 24.5 billion yuan.

CBN : In recent days, steel prices have entered a downturn again, and the voices demanding a sharp drop in ore prices are getting louder and louder. What do you think about the current market and these voices?

    Zhang Xiangqing: It is now the most confusing moment for all the steel industry. On the one hand, downstream demand has shrunk, and there has not been a very clear recovery. On the other hand, this year's international iron ore prices have fallen too low and dropped below 50 US dollars / ton. As the cost of foreign mines is lower and the competitiveness is very strong, more than 50% of the domestic iron mines will have no profit. Once the domestic mines are closed, it may cause changes in the market supply and demand relations and lead to the possibility of changes in international ore prices.

CBN : According to our understanding, the relevant departments may reduce the number of importers when they re-examine the qualifications of imported ore mining companies. What do you think about the quality of imported ore is gradually being mastered by some big steel mills and big traders?

    Zhang Xiangqing: Steel mills and traders can charge a small steel plant agent for a fee, but these steel mills with import long-term co-ordination qualifications should use a portion of their profits to eliminate outdated production capacity. There are still a large number of backward production capacity in China, but there are great difficulties in eliminating them. The big steel mills should also make some contribution while enjoying the preferential policies.

CBN : According to our understanding, many small steel mills have survived through environmental protection with little or no investment.

    Zhang Xiangqing: Some small steel mills have this kind of situation. Some steel mills have been evading taxes for a long time, so that the profit per ton of steel can increase by 100 yuan to 200 yuan. Under such circumstances, how can steel mills, which really provide a stable tax revenue to the country, survive? My company spent 2.5 billion yuan on environmental protection, recycling of water, and paid a large amount of taxes every year. However, some small steel mills that are evading taxes and failing to comply with environmental protection standards are still producing, and some local governments have not been shut down due to taxation. But in the long run, the existence of these companies is more harmful than benefits. Therefore, I suggest that the state should conduct strict inspections on these tax evasion and non-compliance companies.

CBN : The wave of mergers and reorganizations in the steel industry is now very high. The four major state-owned steel companies in Tianjin are preparing for a joint reorganization. Some view that the private steel mills' living space is getting harder and harder. What do you think?

    Zhang Xiangqing: It is beneficial to build a large steel group for centralized procurement, centralized sales, etc. The increasing number of large steel groups is certain to squeeze small steel mills, but small steel mills can improve product quality and investment. Upstream industries and other ways to enhance competitiveness. The strategic plan of Rongcheng Steel this year includes the second high-speed wire rod production line, the 1 million tons direct-reduction iron project for rotary hearth furnace, the 1.5 million-ton oxide pellet project, the 1200m3 blast furnace, and the nickel smelting project. The construction of these new projects will Ronggang's overall technical equipment and competitiveness have been upgraded to the industry's best level.