Steel firm aims to cash in as China modernises

MAANSHAN Iron and Steel Company (Magang) - one of the nine Chinese enterprises chosen to issue stocks in Hong Kong - is expected to benefit from the Government's efforts to upgrade China's antiquated infrastructure.

Magang, one of the 10 largest iron and steel suppliers in China, is said to have the 25th largest turnover of any industrial enterprise in the country.

Like its competitors in China, Magang has been obliged by rigid central planning to specialise in certain products.

Most of its products fall into one of four related categories: section steel, wire rods, steel plates and wheel tyres.

Magang currently owns the only plant in China that produces train wheels and tyres, and the only production line that produces H-section steel.

''Our product structure is far superior to our competitors','' said Magang president, Hang Yongyi.

''In terms of wheels and tyres, the yearly investment in railway construction will be as high as 32.5 billion yuan [about HK$43.84 billion at the official rate] during next few years. Our wheels will go wherever the railway reaches,'' Mr Hang said, adding that a great number of existing wheels and tyres had to be replaced each year.

''As far as structural steel is concerned, large-scale infrastructure projects will need huge amounts of steel during the economic take-off in China,'' he said.

Mr Hang noted that some projects, such as the Three Gorges and underground railways in many cities, would give Magang immense opportunities for developing new markets.

Noting that all the wheels running on the Chinese railway network were exclusively manufactured by Magang, Mr Hang said: ''After the completion of the Beijing-Kowloon railway in 1997, our wheels will also roll into Hong Kong.'' Currently, annual output of wheels and tyres is 170,000 tonnes, and up to 210,000 tonnes of first-grade wheels and tyres will be put out annually from the end of this year, when renovations on the mill have been completed.

Magang also supplies materials for the construction, mining, automotive, shipping and machinery industries.

''Our present H-beam production line is the first one in China. It can produce 150,000 tonnes [per year] of H-beams of less than 200 millimetres. One of the purposes of our issuing stock is to import techniques and equipment to produce H-beams of more than 200 millimetres,'' Mr Hang said.

Magang's annual steel smelting capacity reached 2.37 million tonnes in 1992.

With the completion of a 2,500-cubic-metre blast furnace scheduled for this year, and improvements to the smelting system, annual smelting capacity is forecast to reach 3.5 million tonnes by 1996.

The blast furnace is designed to have an annual production capacity of 1.75 million tonnes of pig iron.

Meanwhile, improvements to Magang's train wheel and tyre manufacturing plant, which started in 1992, are expected to be completed by the end of this year.

According to Mr Hang, most of the company's products are for domestic sales. Only a minority is exported to earn foreign exchange.

Products go mainly to the 10 provinces closest to Magang's production bases, including Anhui, Jiangsu, Zhejiang, and to Shanghai.

Products exported to Hong Kong and Japan include train wheels and tyres, wire rods, L-section steel, vanadium pentoxide and steel billets.

Although the company's ability to earn foreign currencies is not high, analysts believe high domestic steel prices could offset this weakness.

The business involves all the iron and steel production processes, including sintering, coking, iron-making, and steel smelting and rolling.

Magang is currently undergoing a re-organisation to prepare for its eventual listing on the Hong Kong stock exchange.

The company will retain its mining and other businesses, and will be renamed as Maanshan Magang Holding Company.