Rizhao: new steel city for Jinan-Laiyang merger

SteelOrbis Shanghai With strong backing from the Shandong government, the merging process of Jinan Steel and Laiyang Steel is still continuing. The new combined company will be established in Rizhao, a seaside city in eastern Shandong province, instead of in the cities of Jinan and Laiyang where the two steelmakers in question have their bases. According to indications from Jinan Steel, the new steel manufacturing base in Rizhao is being designed with a view to the production of over 10 million tons every year. Currently, the capital earmarked for investment in the new facilities amounts to RMB 35 billion, while the construction period is expected to last about seven years. For the purpose of collecting investment capital, Jinan Steel is moving towards offering 280 million new stocks at the end of 2006 and is also getting in touch with several powerful investors, including non-domestic ones. 26 years ago, when the Chinese government was deciding to set up Baosteel, Rizhao was the prime candidate for the new mill's location. However, in the early 1980s, Rizhao was just a little town where agriculture provided the main source of economic income. Worried that the huge water consumption required by steelmaking would have serious adverse consequences on the area's agricultural water demand, the local government finally rejected the plan to establish Baosteel there. A beautiful seaside city with a number of favorable features, it is not surprising that Rizhao has now been chosen twice as a suitable steel industry location. Its advantages may be summarized as follows: Logistics Rizhao is a natural deep water port which doesn't freeze over. Its annual throughput is around 17-19 million tons. In addition, it is close to major railways and national highways. All these favor ease of transportation of iron ore, coal, steel, etc. Water and electrical power Rizhao is a rare city in China for its rich precipitation-average which reaches 917 mm a year. For this reason, a reservoir with a capacity of 270 million cubic meters has been built there and there is also plentiful groundwater. Furthermore, Shandong is also a province with very rich electrical power resources. Rizhao's power plant with a capacity of 700,000 KW will be well able to meet the steelmaker's demand. Pollution control Due to proximity to the seacoast, after being processed, the polluted water from the mill will be able to flow with ease into the sea, causing minimal local environmental pollution. Moving expense Most of the area earmarked for the construction of the mill is deserted and barren and has few residents. Thus, it's easy to build there and the expense involved in moving will be low. Due to the remarkable economic advantages it will bring, local government is passionately in favor of this project. Policies to assist the project have already been promised by the principal local officials. We may safely predict Rizhao's future as one of the new and promising steel cities in China.