China’s leading steelmaker Baowu Group is considering plans to relocate two blast furnaces from Xinjiang to Cambodia, in order to transfer the excess capacity overseas, as reported by industry sources. This would lead to the establishment of Baowu Group’s first overseas production base.
Such reports have been welcomed by government officials and private sector enterprises in Cambodia as they consider that local production capacity in Cambodia would help to satisfy the country’s increasing demand for steel and provide support for the construction industry.
According to the reports, Baowu Group is considering the relocation of two blast furnaces with a combined capacity of 3.1 million mt from Aksu in Xinjiang to Cambodia.
Over the past three years, China has eliminated 150 million mt of crude steel production capacity, while it still has an annual crude steel capacity of 980 million mt.
In recent years, Cambodia’s construction steel has developed rapidly, driving up demand for steel. In particular, Vietnam is its largest source of steel imports. In the January-July period of 2018, Cambodia imported 717,572 mt of finished steel from Vietnam, up 49 percent year on year.
Seang Thay, spokesman for Cambodia’s commerce ministry, stated that Cambodia is looking for the opportunity to produce steel locally due to tbooming demand. Currently, Cambodia can only produce cement, while it needs to import other materials to develop its construction industry.
In the first quarter of the current year, investment in Cambodia’s real estate sector exceeded $1.8 billion, up 93 percent from the fourth quarter of 2018, with foreign investment, especially investment from China, being the main driving force.
Market analysts in Cambodia stated that, if the relocation of Baowu Group’s blast furnaces to Cambodia is realized, Cambodia’s trade deficit will be lowered as more than 90 percent of steel for its construction industry is currently imported.