Zhanjiang, known for its aquaculture, is a beautiful seaside city in Guangdong province in southern
China. In recent years, this city has attracted the world's attention with the news of the upcoming
construction of an important steel project here. The project will involve the building of a new steel mill with an annual output of over 10 million tons. This is part of
Baosteel's grand strategy aimed at expanding output and taking on the Guangdong market in southern
China which has a high density of industrial manufacturers. Since another Chinese steel giant, Wuhan Steel, is located closer to Guangdong than
Baosteel, and since the former is also planning to build a big new
steelmaking project in Fangcheng city (a seaside city in Guangxi province, neighbor to Guangdong),
Baosteel feels huge pressure and is thus working closely together with the Guangdong government and major local steelmaker Shaogang in order to promote progress on its new project.
So far,
Baosteel has concluded agreements of intent with the Guangdong government to build and develop this project in association with Shaogang. Following great efforts, this project has been approved by the many relevant authorities and now only awaits final approval from the National Development and Reform Committee (NDRC). Although the Chinese central government is taking strict measures to limit new investment in the steel industry on account of the current steel oversupply situation in
China, this project is moving closer to final approval according to internal signals emanating from
Baosteel's top management. Lately,
Baosteel Vice President Zhaokun, was appointed to oversee the work in Guangdong and to hasten preparations. Indeed, substantial partial
construction work has been organized in Zhanjiang, and both
Baosteel and the Guangdong government are feeling more confident on the prospects of receiving final approval for the project.
There are two major reasons in favor of Chinese central government approval of this project:
Firstly, since Mittal merged with Arcelor and became the number one steelmaker in the world with output of over 100 million tons, local steelmakers are under huge pressure to merge and the Chinese government also feels this tension clearly. Without local super steelmakers, the Chinese steel industry will inevitably be in danger in the near future.
Secondly, merger and combination talks between domestic steelmakers are not going well for certain reasons, in spite of the encouragement of the
China government. If super steelmakers are not soon formed by mergers, the only recourse left is to encourage companies towards huge expansion.
Guangdong's domestic supply and demand for steel was 13.6 million tons and 36 million tons respectively in 2005, with a difference of about 22.4 million tons. The output of
Baosteel's new project in the first phase is targeted at 10 million tons per year. As regards the long-term plans, this figure has been set at 20 million tons. If the project gets underway, the local poor demand for steel will be satisfied easily. Due to Zhanjiang's good natural deep water piers, big cargo ships and oil tankers with carrying capacity of over 300,000 tons and 500,000 tons respectively will be able to berth directly beside the new factory. A smooth supply of materials will thus be guaranteed.
With all preparations having been made,
Baosteel now eagerly awaits a messenger bearing good tidings!