1) HBIS Group’s business and vision
2) HBIS Group’s experience in integration and restructuring
3) The Chinese government’s restructuring in the future
4) How HBIS is preparing for strengthening environmental regulations
5) Smartization of the Chinese steel industry
6) Global trade conflicts and the steel industry
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Challenges and responses in the Chinese steel industry (Author: Yu Yong)
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with HBIS Group Chairman
Challenges and Responses
in the Chinese Steel Industry
Yu Yong
Chairman, HBIS Group
Dr. Yu Yong came into the steel industry in 1987. In January 2006, he became Vice President of Tangshan Iron &
Steel Company. In 2010, he was appointed Chairman of HBIS Tangsteel Company. From 2012 to 2013, he served as
President and Vice Chairman of HBIS Group. In December 2013, he was appointed Chairman of HBIS Group. Since
January 2018, he has been Chairman of Chinese Iron & Steel Association(CISA).
Dr. Yu Yong holds a master’s and doctorate degrees in Metallurgical Engineering from University of Science &
Technology Beijing (USTB). In 2002, he went to Singapore as a Senior Visiting Scholar in Nanyang Technological
University, where he got a Doctorate in Economics.
2. Vol.05 June 2018 45
Challenges and Responses in the Chinese Steel Industry
Q: Please tell us about the businesses, core
values, and vision of HBIS Group.
A: HBIS Group is one of the world’s largest
iron and steel manufacturers and compre-
hensive service suppliers.
The Group encompasses over 30 sub-
sidiaries with 120,000 employees. In 2017,
our revenue stood at RMB 306.8 billion and
year-end total assets at RMB 376.2 billion,
ranking 221st
among the Fortune Global
500.
The Group received “highly competi-
tive”—the highest rating of the Report on
the Comprehensive Competitiveness of
Chinese Iron and Steel Enterprises in 2016,
released by the China Metallurgical Industry
Planning and Research Institute (MPI). HBIS
is currently a member of the World Steel
Association’s Executive Committee and the
rotating Presidential Enterprise of the China
Iron and Steel Association.
Bearing the motto “Assuming the Re-
sponsibility of a National Industry”, HBIS
maintains a vision of becoming a highly
competitive steel company.
While following its environmental pro-
tection doctrine of “green steel-making
for human civilization,” HBIS pursues the
“customer-oriented” sales ideology and the
philosophy that “employees provide the irre-
placeable competitiveness of a company.”
We are striving to transform ourselves
into a multinational conglomerate with glo-
balized resources, markets, and customers.
Keeping steelmaking at the core of its
business, HBIS is committed to becoming an
integrated conglomerate with a top global
brand and comprehensive competitiveness.
Business Areas
Dedicated to producing strong and superior
steel products HBIS has in recent years been
pursuing vertical expansion in the steel in-
dustry chain and expanded use of the full
resource chain from the perspective of the
entire industry value chain. Also, we are
making significant strides in growing our
non-steel and overseas businesses.
Steel products: Equipped with globally
competitive facilities, HBIS fully meets the
steel-making standards of China. HBIS has
a strong reputation at home and abroad
for cold-rolled steel sheets, high strength
steel bar, wide flats, pipeline steel strip, and
special steel round bar. We hold the largest
market share in China of steel products for
home appliances and the second-largest
market share of automotive steel.
Non-steel business: HBIS maintains busi-
ness segments in mining, finance and secu-
rities, modern logistics, steel trading, and
Bearing the motto “Assuming the Responsibility of
a National Industry”, HBIS maintains a vision of becoming
a highly competitive steel company.
3. 46 Asian Steel Watch
I N T E R V I E W
equipment manufacturing. For our future
development, we are focusing on the exten-
sive use of steel by-products, as well as new
materials and new energy businesses.
Finance sector: We have four subsidiaries—
HBIS Finance, HBIS Leasing, HBIS Factor-
ing, and Caida Securities. In order to seek
efficient industrial capital financialization
and finance capital industrialization, the
industrial finance chain has become an im-
portant means to improve benefits for the
Group.
Overseas business: We are committed to
securing global resources, global markets,
and global customers. We are ensuring the
globalization of our full industrial chain
from resources and manufacturing to trad-
ing. In the past few years, HBIS has acquired
the South African copper producer Palabora
Mining Company (PMC) and Swiss iron and
steel trader DITH. In 2016, HBIS assumed
full ownership of the only state-owned steel
mill in Serbia.
Q: HBIS Group is regarded as a successful
model for integration and restructuring in the
Chinese steel industry. Please share some of
the experiences from the success.
A: The integration and restructuring of HBIS
have taken place against the backdrop of
Chinese economic development entering a
new phase, the so-called “new normal”. After
the winding down of the high-growth era,
China has begun a development stage char-
acterized by market saturation, fierce com-
petition, credit crunches, and low benefits.
HBIS management recognizes that in-
dustrial development must necessarily be-
come rationalized and mature and that it is
an irreversible trend for the steel industry
to move forward to full marketization and
globalization. This “new normal” creates a
strong mechanism forcing steelmakers to
improve competitiveness through genuine
reform. Under this ideological guidance, we
are equipping HBIS with clear strategies,
flexible tactics, cohesion, and reform &
opening through multifaceted reforms.
Establishing a modern group manage-
ment system for strategic management
and control
To apply the three core functions of our
headquarters—strategic decision-making,
resource sharing, and cooperation services—
HBIS is bolstering the group’s determination
and principles. Emphasizing top-level goal
setting and target management, headquar-
ters resolutely sets a development direction
and focuses on ‘what’ to do. Subsidiaries de-
cide the ‘how’ and execute these decisions in
order to enhance competitiveness.
The three functions are categorized into
nine key areas: strategic planning, invest-
ment decision-making, HR affairs, overall
budget, financial management and control,
operational adjustment, sales management
and supervision, external partnership, and
risk management.
Advancing the steel business with central
4. Vol.05 June 2018 47
Challenges and Responses in the Chinese Steel Industry
financial management and control as a
breakthrough
To change yourself, you must create the
proper environment first. HBIS has recently
set a program of “zero new loans” as a red-
line that cannot be crossed. We have con-
tinuously reduced our debt-to-equity ratio,
standardized costs, and established a set-
tlement center and financing source for the
group. We have also expanded low-cost lend-
ing channels at home and abroad, actively
reformed financial products, and extensively
sophisticated our debt structure.
Through the financial management and
control reforms, subsidiaries of HBIS Group
have discarded the conventional manage-
ment practice of being highly dependent
both on the group and on loans. Instead,
they have formulated production manage-
ment methods focusing on highly efficient
use of funds in order to ensure sustainable
development.
The Group has reduced external con-
signment projects and established policies
for managing traders. By distributing such
policies to its subsidiaries, the group has led
them to cut costs and restore the market
competitiveness of the steel business.
Pursuing reform through a flattened
management structure with the produc-
tion line as an independent market unit
To adapt to increasingly individualized
and differentiated customer demand, HBIS
is seeking production structure and resource
allocation reform. We have been working
toward a flattened management structure
with the production line as an independent
market unit. By shifting the focus of the
management of steel subsidiaries to pro-
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duction lines, we have driven the production
lines to the center of corporate resource al-
location, operation, and management and to
the frontline of customer services.
Currently, HBIS has 16 integrated prod-
uct segments encompassing production,
sales, and research. Each market unit is led
by top management. In the face of changing
market conditions, each unit is equipped
with three special teams of production op-
eration, technology development, and sales
services. Along with increases in resource
allocation and operational efficiency, they
improve the product structure and corporate
benefits.
Upgrading product mix by satisfying in-
creasingly sophisticated customer needs
and expanding the industrial chain to
downstream customers
With a strong emphasis on markets and
products, HBIS Group has established cus-
tomer-oriented ideology of steel industry
and upgraded the product mix by satisfying
customers’ needs for high-end products.
Since 2016, we have expanded our fund
input and R&D from production to custom-
ers. We have established a joint laboratory
for high-quality steel products with client
companies. We have utilized this to build
strategic capital partnerships with compa-
nies in steel-consuming industries, including
automobiles, home appliances, and equip-
ment manufacturing, thereby expanding the
industrial chain.
Q: Thanks to active restructuring by the Chi-
nese government, “ditiaogang” (low-quality
steel made from scrap metal) has disap-
peared and overcapacity has somewhat
eased. What is the direction for restructuring
by the Chinese government in the future?
6. Vol.05 June 2018 49
Challenges and Responses in the Chinese Steel Industry
A: China is the only country that announces
targets for reducing steel production capaci-
ty both by degree and scope of execution. It
is the only country in the world that actually
meets these targets. However, the effects
of the timing and execution of the capacity
cuts benefit the entire world. Beginning
with a capacity cut, China has implemented
restructuring, improved the path of growth,
and significantly elevated environmental
protection. China has offered its own solu-
tion for addressing overcapacity in the global
steel industry.
In February 2016, the Chinese govern-
ment announced a capacity reduction target
of 100-150 Mt over the next five years. It
had reduced capacity by 120 Mt by the end
of 2017 and plans to cut an additional 30 Mt
of capacity in 2018. If this is realized, China
will be able to advance in its capacity-cut tar-
get for two years.
These capacity reductions have allowed
the Chinese steel industry to overcome dif-
ficulties and upgrade itself. For its contribu-
tion to the recovery of the global steel mar-
ket, China has been appreciated in the global
steel industry.
As the Chinese economy is shifting from
rapid growth to qualitative growth, the steel
industry will pursue the following five types
of restructuring in the new-normal era.
First, the Chinese steel industry will
coordinate products and customers in line
with government supply-side reform. Facing
the evolution of steel-consuming industries,
it will seek mutual growth with these indus-
tries by actively coordinating the customer
and product structures.
Second, it will achieve low-carbon green
growth by improving environmental tech-
nologies. Pursuing a philosophy of “coex-
istence of humans, steel, and the environ-
ment,” it will produce green steel for human
development by implementing an environ-
mental action plan and establishing a carbon
emissions control system.
Third, it will bolster innovation strategies
and improve production efficiency in all fac-
tors. Changing the corporate development
ideology from the investment drive to an in-
novation drive, it will strengthen innovation
in technology and management and fuel
growth as well.
Fourth, it will continue the ideology of
reform and opening and accelerate the glo-
balization of the Chinese steel industry. The
Chinese steel industry has already achieved
localization of major steel-making technolo-
gies and key production facilities. It has clear
relative competitiveness in the global mar-
ket. Under the open cooperation platform
known as “One Belt One Road” (OBOR), the
Chinese steel industry is both confident and
capable of playing a more important role in
the economic growth of countries along the
OBOR route and in other developing coun-
tries.
Fifth, the steel industry will enhance
efficiency through mergers and acquisitions
(M&A). During the period of the 13th Five-
Year Plan (2016-2020), the phased and
structural supply glut will linger in the Chi-
nese steel industry. China is encouraging
M&A in the steel industry to funnel idle
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capacity into capable companies and regions
with relative advantage. By doing so, it can
achieve a rational division of labor, comple-
ment mutual weaknesses, and improve the
overall efficiency of the industry.
Q: China is strengthening environmental reg-
ulations. What does HBIS think about it?
A: We strongly believe that environmental
protection is a fundamental essential prin-
ciple for any company and reflects compre-
hensive corporate competitiveness. Since
our integration, 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. We have taken the lead in formu-
lating and implementing our “Green Devel-
opment Action Plan.”
Through these efforts, we have clarified
our goals and directions for green develop-
ment and accelerated our progress toward
becoming a clean circular and sustainable
green steel company. So far, we have invest-
ed 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. Thanks to these
efforts, HBIS is among the leaders in energy
saving and environmental protection indices
and has been described as the “cleanest fac-
tory in the world.” HBIS’s project to apply ur-
ban recycled water as the only water source
in iron and steel production was awarded in
the Excellence in Sustainability category of
the 7th
Steelie Awards by worldsteel in 2016.
Stricter environmental regulations and
investigation in China are now providing
HBIS with an important opportunity for
growth. Companies complacent about gen-
erating profits through environmentally
harmful practices are gradually being edged
out of the market. The phenomenon of “bad
money drives out good” is disappearing as
the steel industry enters a stage of positive
circular development.
As a next step toward low-carbon green
development, HBIS is increasing its green
investment, producing “green products”
through “green manufacturing”, and estab-
lishing a “green industry.” By doing so, it will
contribute to the continuous and sound de-
velopment of the steel industry.
From the perspective of “green manu-
facturing”, HBIS is working to accelerate the
spread of energy-saving technologies and
improve steel-making energy consumption
indices to meet global standards. At the
same time, it is advancing lightweighting,
recycling, and resourcing in production pro-
cesses and engaging in in-depth cooperation
with leading global energy-saving and envi-
ronmentally-friendly companies. By jointly
conducting projects with these companies
for the comprehensive use of energy, slag,
and off-gas and the treatment of wastewater,
HBIS has been relentlessly raising the clean-
liness and efficiency of primary and second-
ary resources while maximizing the values of
recycled resources.
8. Vol.05 June 2018 51
Challenges and Responses in the Chinese Steel Industry
From the perspective of creating green
products, HBIS is providing customers
with high-performance, energy-saving, and
less-polluting green products through for-
ward- and backward-linked customer man-
agement.
In recent years, HBIS has built 17 re-
search and development platforms along
with global leading companies, universities,
and research institutions, including the
Chinese Academy of Social Sciences, North-
eastern University, POSCO, Siemens, the
University of Queensland in Australia, and
Swerea MEFOS to create global technology
development platform. Based on this plat-
form, HBIS has expanded R&D investment
from inside the company to customers and is
actively adapting to the trend toward more
lightweight steel materials and sustain-
able development. We are developing and
expanding high strength, high toughness,
high corrosion resistant, and lightweight
steel products. With respect to building a
green industry, HBIS has emerged as a front
runner of green development in the Chinese
steel industry by exploring and practicing
green growth methods and establishing a
green brand. Through the integration of in-
ternal resources and strategic partnerships,
we have succeeded in creating a range of
green companies including HBIS Energy,
HBIS Chemical, HBIS Sales, HBIS Mining,
and HBIS-CSCES Steel Structure Company.
Based on our “green steel” brand and
environmental protection technology ad-
vantages, HBIS is solidifying its basis in
the three areas of energy conservation,
environmental protection, and resource
recycling to meet the growing demand for
green products. With a strong emphasis on
comprehensive services, HBIS is helping to
make the industry less energy intensive and
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transitioning from being urban-dependent
to providing services to the city. Promoting
coexistence among steel mills, cities, and so-
ciety as a whole, it is generating low-carbon
green value for the steel industry.
Q: The Chinese steel industry is facing a
wave of smartization. How is the progress in
the Chinese steel industry?
A: As the Chinese economy shifts from
high-growth to high-quality development,
steel demand is progressing from massive
uniform demand to diverse, individualized,
and customized demand. Furthermore, over
the last decade smart (intelligent) technol-
ogy represented by Big Data and AI has ad-
vanced from the theoretical research stage
to the industrial application one. The deep
convergence of smart technology and the
steel industry is increasing efficiency and
reducing costs. It will also allow manufactur-
ing to become more market-adaptable and
satisfy customized demands.
In fact, major Chinese steel companies’
automation and information levels have
reached global standards. The digitaliza-
tion rate of their major operation processes
stands at over 65% and the ERP rate sur-
passes 70%, demonstrating a sound basis
for smartization. HBIS Group has recently
emplaced an automation and information
support system and made great strides in
quality control, production-cost manage-
ment, and flexible production. Some facto-
ries have been designated as national smart
manufacturing pilot plants. We have set di-
rections for improving our employees’ smart
sensibilities, capacity for developing new
products, and customer service. We are mov-
ing forward from traditional manufacturing
to smart manufacturing.
First, we will implement smartization
and robotics applications across all process-
es. Second, we will build simulation systems
and digital twin systems to reduce the new
product development cycle and enhance cus-
tomer service capabilities and overall bene-
fits. Third, we will realize the potential value
in data through the application of next-gen-
eration AI and Big Data technologies and en-
hance system analytics and predictability to
provide customers with a trustworthy basis
for decision making.
Q: The intensification of global trade conflicts
can have a great impact on the steel indus-
try. What should global steel companies and
worldsteel do?
A: The Chinese steel industry has consistent-
ly been focusing on satisfying domestic de-
mand rather than encouraging massive steel
With a strong emphasis on comprehensive services, HBIS
is helping to make the industry less energy intensive and
transitioning from being urban-dependent to providing
services to the city. Promoting coexistence between steel
mills, cities, and society as a whole, it is generating low-
carbon green value for the steel industry.
10. Vol.05 June 2018 53
Challenges and Responses in the Chinese Steel Industry
exports. China’s steel trade policies have
neither promoted exports nor fully refunded
value added tax on steel exports according to
international practices. Instead, China has
actually imposed tariffs on steel exports to
prevent massive steel outflows and maintain
stability.
China was a net steel importer until
2005. Steel exports have surged in recent
years, mainly attributable to the fact that
Chinese steel products have gained global
competitiveness and have been subject to
objective rules such as economic globaliza-
tion and international division of labor.
Since 2010, the share of exports in Chi-
nese crude steel production has stabilized
in the range of 7-14%. In 2017, China’s net
steel export ratio (% of crude steel produc-
tion) stood at only 7.7%. In the future, Chi-
nese steel exports will demonstrate a grad-
ual and stable trend due to the upgrading
of the Chinese economic structure, phased
implementation of supply-side structural re-
forms, and maturation of the global market
structure.
Economic globalization is an irreversible
trend. The global steel market has become a
buyer’s market. If any country abuses global
trade rules and implements excessive protec-
tionist measures simply in order to shelter
ailing domestic industries, this will lead to
chaos in the global trade order and hinder
the sound and sustainable development of
the global steel industry.
As the Chinese steel industry partici-
pates in global competition and exports an
appropriate volume of steel products, it can
satisfy demand from global downstream
customers while vitalizing the international
steel industry. Currently, China is accelerat-
ing the implementation of strategies for up-
grading the steel industry. The Chinese steel
industry hopes to join forces with its global
counterparts and worldsteel to address
pressing issues and challenges. It also hopes
to level the playing field for negotiation and
competition in the international arena and
ensure a sound trade order.