Baosteel consolidates its leading position in China

Being China's biggest steelmaker and ranking 296th among the top 500 corporations in the world, Baosteel owns remarkable competition advantages. But due to great changes both in the world and local markets, this steel giant also feels the impacts of crisis and has begun to take steps in consolidating its leading position. It is well known that Baosteel has signed several strategical cooperation agreements with some Chinese steelmakers such as Bayi and Magang, and even began to buy in other listed steel companies' stocks on the capital market. Besides these steps within the steel field, Baosteel also started to establish tight ties with cooperators in other related fields and improve its interior management. Baosteel's steps can be summarized as follows: Materials Here, materials mainly refer to coal and coke. Coal and coke are important materials in steel making processes. Although China is the biggest coal and coke supplier in the world with rich resources, the prices kept increasing in recent years because of huge local demand, especially demand from steel industry. As a result, steelmakers' production costs obviously increased. To control the costs of coal and coke, from year 2005, Baosteel have contacted several big coal and coke suppliers in China and hoped to sign cooperation agreements with them, but the results were not good. The reason is simple: due to huge demand and increasing price, no supplier wanted to fix price on a level for long term. The extreme example is that the price of coal averagely increased once by 3-5 days before China's Spring Festival in 2004 and 2005. But such situations have changed now. On July 22, Baosteel signed cooperation agreement with China's biggest coal supplier Shenhua Group located in Neimeng who has been number 1 coal supplier in China for 5 consecutive years and would be number 1 in the world in 2007. Shenhua's stable price and supply of coal and coke will of course bring Baosteel considerable benefits. Shipping Baosteel supplies iron ore entirely via imports. Due to huge quantity of imported iron ore, total shipping cost is high every year. To lower logistic cost, Baosteel bought three bulk ships and actively sought for long term cooperation with big shipping companies. COSCO and CSC are the top two shipping companies in China, Baosteel have signed long term agreements with both of them to fix shipping costs and adjusted according to market changes every year. In July 2006, top leaders of these two companies have visited Baosteel to communicate for further tight cooperation. Interior management Baosteel kept improving its management efficiency from many aspects. From 2005, Baosteel started to reconstruct its purchasing and sales systems to perfect flows and lower cost. In China, it is traditionally considered that blue collars are ranked low in enterprises without good future, and only managing positions are high-level and worthy of respect. On such a background, many experienced skilled workers left native enterprises for foreign companies. This really caused a great loss. For the purposes of avoiding such losses and improving employees' work efficiency, Baosteel set “chief post” in each employment field. No matter if managing staff or laborer, anyone could change his or her work and salary conditions after working hard. A steelmaker's power is absolutely not only shown by its output. After many great efforts, Baosteel is becoming stronger and its leading position in China has been further consolidated.