Sustainable Development Path of 100B Yuan Liuzhou Iron and Steel Group

For China’s Guangxi Liuzhou Iron and Steel Group Co., Ltd. 2019 is a year of remarkable accomplishments, in which it achieved the continuous growth amid the depression of the iron and steel industry, with business revenue exceeding RMB 100 billion yuan, making itself the first manufacturing enterprise based in Guangxi, China that realizes an annual income of more than RMB 100 billion yuan, another impressive accomplishment after it became the first Guangxi-based state-owned enterprise with an annual profit over RMB 10 billion yuan in 2018.

“Figure is only the external form of expression, behind which it represents the steady and sustainable development of Liuzhou Steel Group over the past four and five years,” said Pan Shiqing, Party Secretary and Chairman of Guangxi Liuzhou Iron and Steel Group, in the exclusive interview with China-ASEAN Panorama.

All-round innovation and diversified development

From 2010 to 2015, China’s iron and steel sector with overcapacity and inappropriate industrial structure sustained loss for years. As the major player of the sector, Liuzhou Steel Group could not get itself spared from the losing streak and for the first time since the nationwide reform and opening-up in 1978 registered a loss in 2015, which was the first year when Pan Shiqing served as the head of the group.

“The deep trouble of the industry was actually a good time for a firm with strengths to stand out,” argued Pan Shiqing, adding that faced with difficulty, only innovation could make a breakthrough and that innovation did not stand on its own but was closely related to all positions and all businesses of the company. Consequently, the group began its path toward all-round reform and innovation covering management systems, marketing models, products and so on.

For instance, in product innovation, Liuzhou Steel Group continued to optimize its main business on iron and steel, which focused on conducting research and development of new products, promoting new technology application, enhancing steel product performance and increasing the ratio of grade steel in product mix that reached 60.2% and generated a revenue of RMB 665 million yuan in 2019. Another example is the marketing model that was shifted from the one featuring sale by output to the one by sale. Digital marketing was also put into active use and production adjusted flexibly in response to the market demand, to achieve the shortest production and fastest delivery and to prevent ineffective supply. 

With all-round innovation implemented, Liuzhou Steel Group witnessed the significant rise in the operating efficiency indicators such as profit rate of steel per ton, steel production per capita, profit rate of sales, etc., achieving the high quality development. In 2017, the profit of the group came into the top 10 of the sector in the country and its performance in 2018 made the best record in history.

Meanwhile, the “winter of iron and steel industry” experienced in 2014 and 2015 made the management of the group realize that the sole reliance on steel business is vulnerable and only diversified development is the right answer to withstanding market risks. Over the past few years, Liuzhou Steel Group has formed the business model of “1+4+X”, in which “1” is the iron and steel business; “4” stands for the trade and logistics, energy and chemical engineering, environmental protection and comprehensive utilization of resources, service business; “X” means building engineering, information technology, etc. with the scale and profit sources becoming more balanced. In 2019 the group realized a revenue of RMB 37.652 billion yuan for its diversified business, accounting for nearly 40% of its total income, and the profit also reached RMB 917 million yuan, bringing the two figures to a record high. 

Pan Shiqing said that the enhanced quality, and the optimized business model brought by the reform and innovation are the very foundation on which Liuzhou Steel Group achieves sustainable development and breakthroughs. 

Implementing the coastal strategy and aiming at ASEAN market

Of the countries along the Belt and Road Initiative route, more than 70% are net importers of steel and major target markets of Chinese steel products. At the same time, the infrastructure projects, and economic cooperative zones sponsored by China in these countries will fuel the export of steel, which provides good opportunities for Liuzhou Steel Group to take part in the Belt and Road Initiative. Currently, products of the group are mainly intended for markets in south China’s Guangxi and Guangdong, with extension reaching other markets in eastern, central and southwestern parts of the country and export covering some 10 countries and regions in East Asia, South Asia, Americas and Africa. 

“At present, our markets are mainly in China, but in the future, the ASEAN and other countries along the Belt and Road Initiative route will definitely be our targets,” said Zhang Weiquan, Deputy Party Secretary and Manager of Distribution Company of Liuzhou Steel Group.

Headquartered in Liuzhou, Liuzhou Steel Group will intensively implement the coastal strategy, which is to expedite the marine economy by building the new iron and steel base with the annual output capacity of 10 million tons in Fangchenggang and the important Liuzhou Steel Zhongjin stainless production base, with a strategic aim at the future and the overseas market in ASEAN countries and beyond.

As the high cost of logistics especially over-land transport for heavyweight of iron and steel products, the export business is in disadvantage, but geographical advantage stands out in Fangchenggang, a city located in the southwest tip of the coastline of the Chinese mainland and the only port city in China with land and sea connections with the ASEAN countries. A new base built in this city will cut the land transport mileage to save billions of yuan in cost, thus establishing the competitiveness of the group in logistics. 

On December 26, 2019, the No. 1 blast furnace of the Fangchenggang Iron and Steel Base achieved the trial operation, and created the amazing “Speed of Lizhou Steel Group” with only 13 months taken for the construction. With the fast development of the Fangchenggang project, the city will be made an important window of the Belt and Road Initiative to achieve the export of steel products to the ASEAN countries and to promote the deployment of iron and steel capacity of China in the world. 

Fighting epidemic and growing with “strength”

Since January 2020, the widespread novel coronavirus (COVID-19) epidemic has posed a huge threat to the whole world. Liuzhou Steel Group has established the leading body and a working mechanism for epidemic prevention and control, with staff set on duty around the clock to execute the order of “day-to-day reporting of even zero case”, tightening the safety net to fight against the virus. As of March 20, no suspected or confirmed cases has been reported from employees and their family members company-wide (including the headquarter in Liuzhou, the Iron and Steel Base in Fangchenggang, the Liuzhou Steel Zhongjin Company in Yulin and the subsidiaries in Guilin and Nanning). 

While conducting prevention and control of epidemic to ensure the safety and health of its employees, Liuzhou Steel Group has voluntarily undertaken its social responsibility as a state-owned enterprise. For example, it donated RMB 30 million yuan to the authorities of Guangxi Zhuang Autonomous Region and Liuzhou, Fangchenggang, Yulin cities, and 8,920 medical masks of various specifications to Guangxi Red Cross Foundation, to help the local authorities to secure the victory in the war against the epidemic; it sent 12 medical workers to the frontline in Wuhan, the epicenter of the epidemic.

In addition, Liuzhou Steel Group tried its utmost to overcome the difficulty in people's movement, logistics and transport to ensure the strong and orderly resumption of work after the epidemic. From January to February this year, the group did not suspend its normal production amid the epidemic, but reported good news one after another: the iron and steel output of the headquarter in Liuzhou grew by more than 5% respectively, with iron making a new record with a 36,800-ton output; the iron and steel base in Fangchenggang succeeded in placing the first caisson for the berth of 100,000-ton capacity; the Zhongjin project of stainless steel in Yulin was under construction officially; two new products were developed and 5 items of new product reserves completed. 

Moreover, during the epidemic, to encourage the flux suppliers for the resumption of work, Liuzhou Steel Group voluntarily offered higher purchase prices of raw materials to help upstream and downstream firms tide over difficulties. 

It is not an overstatement that Liuzhou Steel Group not only reduced the negative impact of the epidemic to the maximum, but also played the role of “pillar” or “stabilizer” in the local economic growth. For the development in the future, Pan Shiqing was full of confidence, “The impact of the current epidemic on the national economy will be short-term and controllable, which will not change the trend of economic growth as a whole in the country. Liuzhou Steel Group will continuously take a variety of extraordinary measures to recover the lost time in production and project construction to speed up the growth of the company.”

Source: China-ASEAN Panorama