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[Asian Steel Watch] Vol.5 (2018.6)

[Asian Steel Watch] Vol.5 (2018.6)

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Interview Challenges and Responses in the Chinese Steel Industry

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1) HBIS Group’s business and vision
  • HBIS Group encompasses over 30 subsidiaries with 120,000 employees. In 2017, its revenue stood at RMB 306.8 billion and year-end total assets at RMB 376.2 billion, ranking 221st among the Fortune Global 500. Bearing the motto “Assuming the Responsibility of a National Industry”, HBIS maintains a vision of becoming a highly competitive steel company. HBIS pursues the “customer-oriented” sales ideology and the philosophy that “employees provide the irreplaceable competitiveness of a company.”
  • Its business areas include steel business, non-steel business, finance sector, and overseas business. In the steel business, it holds the largest market share in China of steel products for home appliances and the second-largest market share of automotive steel. In the non- steel business, HBIS maintains business segments in mining, finance and securities, modern logistics, steel trading, and equipment manufacturing. In the finance sector, It has four subsidiaries—HBIS Finance, HBIS Leasing, HBIS Factoring, and Caida Securities. And in the overseas business, it is ensuring the globalization of our full industrial chain from resources and manufacturing to trading.
2) HBIS Group’s experience in integration and restructuring
  • HBIS management recognizes that industrial development must necessarily become rationalized and mature. To this end, HBIS Group is 1) establishing a modern group management system for strategic management and control, 2) advancing the steel business with central financial management and control as a breakthrough, 3) pursuing reform through a flattened management structure with the production, and 4) upgrading product mix by satisfying increasingly sophisticated customer needs and expanding the industrial chain to downstream customers.
3) The Chinese government’s restructuring in the future
  • The Chinese steel industry will pursue the following five types of restructuring: it will 1) coordinate products and customers in line with government supply-side reform, 2) achieve low-carbon green growth, 3) bolster innovation strategies and improve production efficiency, 4) continue the ideology of reform and opening and accelerate the globalization of the Chinese steel industry, and 5) enhance efficiency through M&A.
4) How HBIS is preparing for strengthening environmental regulations
  • HBIS has maintained its development philosophy of “coexistence of humans, steel, and the environment” and designated “making green steel for human civilization” as its environmental protection ideology. It has taken the lead in formulating and implementing our “Green Development Action Plan.”
  • It has invested RMB 16.5 billion toward achieving this goal. HBIS has closed obsolete facilities, introduced advanced technologies, and strengthened environment management. It has conducted over 430 energy-saving and emission-cutting projects. Now HBIS is among the leaders in energy saving and environmental protection indices and has been described as the “cleanest factory in the world.”
5) Smartization of the Chinese steel industry
  • Major Chinese steel companies’ automation and information levels have reached global standards. The digitalization rate of their major operation processes stands at over 65% and the ERP rate surpasses 70%, demonstrating a sound basis for smartization. HBIS Group has recently emplaced an automation and information support system and made great strides. Some factories have been designated as national smart manufacturing pilot plants.
  • It is moving forward from traditional manufacturing to smart manufacturing: it will 1) implement smartization and robotics applications across all processes; 2) build simulation systems and digital twin systems to reduce the new product development cycle; and 3) realize the potential value in data through the application of next-generation technologies and enhance system analytics and predictability.
6) Global trade conflicts and the steel industry
  • The Chinese steel industry has consistently been focusing on satisfying domestic demand rather than encouraging massive steel exports. China was a net steel importer until 2005. Steel exports have surged in recent years as Chinese steel products have gained global competitiveness and have been subject to objective rules.
  • Since 2010, the share of exports in Chinese crude steel production has stabilized in the range of 7-14%. In 2017, China’s net steel export ratio (% of crude steel production) stood at only 7.7%. In the future, Chinese steel exports will demonstrate a gradual and stable trend due to the upgrading of the Chinese economic structure, phased implementation of supply-side structural reforms, and maturation of the global market structure.
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