InterviewChallenges and Responses in the Chinese Steel Industry
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1) HBIS Group’s business and vision
HBIS Group encompasses over 30 subsidiarieswith 120,000 employees. In 2017, its revenue stood at RMB 306.8 billion andyear-end total assets at RMB 376.2 billion,ranking 221st among the Fortune Global500.Bearing the motto “Assuming the Responsibilityof a National Industry”, HBISmaintains a vision of becoming a highlycompetitive steel company.HBIS pursues the“customer-oriented” sales ideology and thephilosophy that “employees provide the irreplaceablecompetitiveness of a company.”
Its business areas include steel business, non-steel business, finance sector, and overseas business. In the steel business, it holds the largestmarket share in China of steel products forhome appliances and the second-largestmarket share of automotive steel. In the non- steel business, HBIS maintains businesssegments 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 theglobalization of our full industrial chainfrom resources and manufacturing to trading.
2) HBIS Group’s experience in integration and restructuring
HBIS management recognizes that industrialdevelopment must necessarily becomerationalized and mature. To this end, HBIS Group is 1)establishing a modern group managementsystem for strategic managementand control, 2)advancing the steel business with central financial management and control as a breakthrough, 3) pursuing reform through a flattenedmanagement structure with the production, and 4) upgrading product mix by satisfying increasinglysophisticated customer needsand expanding the industrial chain todownstream customers.
3) The Chinese government’s restructuring in the future
The Chinese steelindustry will pursue the following five typesof restructuring: it will 1) coordinate products and customers in linewith government supply-side reform, 2) achieve low-carbon greengrowth, 3) bolster innovation strategiesand improve production efficiency, 4) continue the ideology ofreform and opening and accelerate the globalizationof the Chinese steel industry, and 5) enhanceefficiency through M&A.
4) How HBIS is preparing for strengthening environmental regulations
HBIS has maintained itsdevelopment philosophy of “coexistence ofhumans, steel, and the environment” anddesignated “making green steel for humancivilization” as its environmental protectionideology. It has taken the lead in formulatingand implementing our “Green DevelopmentAction Plan.”
It has investedRMB 16.5 billion toward achieving thisgoal. HBIS has closed obsolete facilities,introduced advanced technologies, andstrengthened environment management. Ithas conducted over 430 energy-saving andemission-cutting projects. Now HBIS is among the leaders in energysaving and environmental protection indicesand has been described as the “cleanest factoryin the world.”
5) Smartization of the Chinese steel industry
Major Chinese steel companies’automation and information levels have reached global standards. The digitalizationrate of their major operation processesstands at over 65% and the ERP rate surpasses70%, demonstrating a sound basisfor smartization. HBIS Group has recentlyemplaced an automation and informationsupport system and made great strides. Some factorieshave been designated as national smartmanufacturing pilot plants.
It is movingforward from traditional manufacturingto smart manufacturing: it will 1) implement smartizationand robotics applications across all processes; 2) build simulation systemsand digital twin systems to reduce the newproduct development cycle; and 3) realize the potential valuein data through the application of next-generationtechnologies and enhancesystem analytics and predictability.
6) Global trade conflicts and the steel industry
The Chinese steel industry has consistentlybeen focusing on satisfying domestic demandrather than encouraging massive steel exports. China was a net steel importer until2005. Steel exports have surged in recentyears as Chinese steel products have gained globalcompetitiveness and have been subject toobjective rules.
Since 2010, the share of exports in Chinesecrude steel production has stabilizedin the range of 7-14%. In 2017, China’s netsteel export ratio (% of crude steel production)stood at only 7.7%. In the future, Chinesesteel exports will demonstrate a gradualand stable trend due to the upgradingof the Chinese economic structure, phasedimplementation of supply-side structural reforms,and maturation of the global market structure.