In the midst of a global economic slowdown, China has been forced into a change of economic strategy. One of the biggest obstacles facing the government is trying to eradicate overcapacity in the steel industry.
High performance Chinese steel is rolling off the line at many factories under the wing of Hesteel Group, China’s second largest steel producer. Hesteel now makes cogs and many other manufactured products as well, all part of the company’s move away from only producing raw steel.
“After our process the additional value will be increased considerably,” said Bai Xaiomou, Deputy Head of Operations, Bohler Production Line, Shisteel Company of Hesteel Group.
Extending the production chain is one way to avoid job cuts amid a global glut in steel. Factorie have been trying to reverse a trend over the past few years of plunging prices and foundry shutdowns because the slowing economy, not just in China, but around the world. Hesteel Group, known by the initials HBIS, has also diversified into mining and logistics.
“The pressure is coming directly from the market. Superficially we have seen the ups and downs of the price, but actually it’s the challenge to the traditional development model for companies and the model for making profits,” said Li Yiren, General Manager, Strategic Planning Dept., Hesteel Group.
It is not just about saving jobs. It is also a key to China’s current economic transformation away from producing basic goods to high-tech parts and products.
“Before the economic crisis the steel industry in China experienced a period that we expanded very fast. In recent years, the steel industry has been developing from one of accumulating quantity to increasing quality,” Li said.
Hesteel Group has cut raw steel production by almost eight and a half million tones over the past six years. The real goal on the factory floor is not just to cut production, but to shift China’s manufacturing and economy into a higher gear.