Introduction
Baoshan Iron & Steel Co., Ltd (Baosteel) is the largest and the most recognized iron and steel producer in China, founded in 1978, headquartered in Shanghai. It is the largest state-owned steel maker, and currently has annual production capacity of 55 million metric tons. It is the top leader in the production and sales of all kinds of steel products, served by approximately 180,000 employees.
Business Overview
Baosteel is one of the main producers of a wide range of iron and steel products including hot rolled plates, hot and cold rolled sheets, galvanized and tin plates, heavy plates, stainless steels and other products. The major business of the company is the production, processing and sale of iron and steel products. The hot and cold rolled sheets are the core products of Baosteel which belong to the downstream products. Its major upstream activities consist of primary iron, coke and direct reduced iron production. In terms of downstream, Baosteel produces mainly motor vehicle sheet and other sheet products, as well as tools and machinery.
Since 1978, Baosteel has undertaken 18 technical upgrading investments totaling 37.08 billion RMB. It has invested in both upstream and downstream businesses, becoming more integrated in these sectors. It now has become China’s largest fully-integrated steel maker.
Financial performance
In 2016, Baosteel achieved 13.979 billion RMB in total revenue. This represented a 3.2% decrease compared to 2015, due to the downturn in the steel industry. It had an operating margin of 4.7%, which was lower than the previous year due to the economic slowdown. However, Baosteels net profit still increased by 9.2% to 4.51 billion RMB compared to 2015.
Opportunities and challenges
The Chinese economy is slowing down and the global economy is unstable. This could act as a major challenge for Baosteel. In order to survive in this difficult market situation, it has to increase its efficiency in order to cut costs and maximize profits. This will be done through technological upgrades, reorganizing production and reducing expenses.
However, this difficult market presents Baosteel with some opportunities as well. The company could acquire other steel companies in order to increase its market share, in line with its plan for strategic mergers and acquisitions. It could also diversify into new fields and enter into new markets in order to increase its profitability.
Conclusion
In conclusion, Baosteel is China’s largest and most recognized steelmaker, and is well-poised to benefit from government policies in the future. It has undertaken major investments in both upstream and downstream businesses and is looking to increase its reach in order to maximize profits and increase market share. However, it is facing a challenging market situation due to the slowdown in the global and Chinese economies. Thus, Baosteel has to closely monitor the steel industry and make strategic investments in order to maximize its profits and grow its business.
