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Coal, steel companies grapple with challenges in struggle for survival
I recently visited Handan in North China's Hebei Province. The city has a long history in the coal and steel sectors. Both industries have been under unremitting pressure in recent years, and State-owned enterprises (SOEs) and private companies alike have found it hard to make ends meet.
In addition, the local government has set a target for tackling overcapacity in the next five years, seen as the most urgent task but also an unavoidable financial burden for local companies.
Wu'an, a county-level city under Handan, is home to 18 steel companies that employ about 66,000 people. Everything there is about steel. During an hour-long drive around the city, I was surprised by the vast number of chimneys from steel furnaces spewing acrid smoke nonstop.
Local residents told me that steelmaking is the city's core industry, and it has strongly supported local GDP growth. There's even a district where most stores sell steel products such as stainless steel wire and rebar.
Some steelmakers have chosen to merge with others to become stronger in the past two years. Those that have survived have to find a way to become more competitive. I visited the mills of privately owned Jinan Steel Group, which was established in 2014 by combining two private producers that were on the verge of bankruptcy. Facing sluggish domestic demand, the company has increased exports while looking to take part in the government's "One Belt, One Road" initiative.
The initiative refers to the Silk Road Economic Belt and the 21st Century Maritime Silk Road, which were proposed back in 2013.
Jinan's chairman has already visited Pakistan, a country along the silk road. However, unlike SOEs that are backed by the government, private entities are more worried about local political and financial uncertainties in foreign countries. Also, recent anti-dumping measures by some foreign countries have been discouraging.
Steelmakers are not the only ones aiming at markets overseas. The oldest coal mine in Handan also started to diversify its business to expand trade with other countries and regions.
Hong Kong Baofeng International Co is a logistics and trade subsidiary established by coal firm Fengfeng Group, owned by the Jizhong Energy Group, one of the largest coal SOEs in China.
The company's trade arm has recently signed a partnership with coal mining factories in Indonesia, where there is a strong demand for coke.
For the coal miner, the initiative is not only about building new plants overseas but also expanding trade with the countries involved.
