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SCMP Reporter

ARELAXING of government restrictions has opened the door for more mainland enterprises to form their own shipping companies.

  Increasingly, mainland businesses are establishing their own shipping concerns so they can control their transport needs.

  Baoshan Iron and Steel Works and Shougang Corporation, two of China's most productive steel mills, are among them.

  Hu Xiaoxia, director and general manager of Bao-trans Enterprises Ltd, a Baoshan joint venture in Hong Kong, said the state administrator of cargo, the China Metal Import and Export Corporation (CMIC), was losing its influence as these enterprises grew and took over the CMIC's role.

  After state organisations were allowed to privatise, Baoshan formed a joint venture with the state freight forwarding monopoly, the China National Foreign Trade Transportation Corporation or Sinotrans.

  In January, 1992, Bao-trans opened its doors in Hong Kong to provide the parent company with shipping services for importing iron ore. It also transports coal and other commodities to export customers.

  In the meantime, Shougang Corporation formed a subsidiary, Shougang Concord International Transport, to handle its own iron ore imports.

  Shougang annually produces between 61/2 and seven million tonnes of rolled steel and is now chartering vessels.

  Shougang Concord president Donald K. L. Chao said the parent steel producer, Shougang Corporation, ''will certainly diversify its source of iron ore in the future''. Such expansion would probably require additional transport capacity.

  Iron ore is transformed into rolled steel to support the fast pace of development on the mainland. Each of China's steel mills relies strictly on one country or exporter of iron ore, such as Brazil, Peru, Australia, South Africa, India and, occasionally,Venezuela.

  Baoshan's imports originate from Brazil, while Shougang has bought a state-controlled mine in Peru as its source.

  Following the visits to Brazil by Vice-Premier Zhu Rongi last May and President Jiang Zemin in November, trade between the two countries is certain to increase.

  Mr Jiang signed a statement of intent with Brazil to generate joint ventures in iron ore mining, especially to develop reserves in the state mine at Carajas.

  Meanwhile, Brazilian exports of iron ore to China have jumped to US$101 million (about HK$780 million) in 1993 from $94 million in 1992. Prospects are excellent for future growth, analysts say.

  Furthermore, China wants to double its imports of iron ore by the year 2000, according to the Brazilian Government.

  Ms Hu of Bao-trans was an employee of Sinotrans for 20 years before she became director and general manager of the shipping joint venture.

  She had previously served Worlder Shipping, another mainland-backed ship manager and shipping broker, as deputy general manager.

  But Baoshan Steel was not content with just one dedicated shipping service. The company is China's largest importer of iron ore and its production is constantly increasing.

   Baoshan produced 61/2 million tonnes of rolled steel in 1992 and more than seven million tonnes in 1993. Production was interrupted for the completion of a new furnace. The target for this year is 7.2 million tonnes.

  However, it expects output of between 17 and 19 million tonnes in 1995. Production like this requires great shipping capacity.

  Ms Hu said: ''Baoshan is thinking of more joint ventures. This year we are facing very strong competition from the other two joint ventures.''   Bao-trans shipped one million deadweight tonnes in 1992 (of which 30 per cent was dedicated to the Nanjing Steel Works) and three million last year.

  Apparently, the volume was insufficient for the parent steel producer which later created two more alliances: Bao Island, a joint venture with Island Navigation Corporation International Ltd, and Bao Hercules, a joint venture with CMIC in New York.

  Bao Island opened its doors at the beginning of 1993 and Bao Hercules was also launched in 1993.

  The three joint ventures are meant to put reliable freight capacity at Baoshan's disposal and at the most competitive rates possible. They are not only in competition with other companies but with each other.

  Because of these new entrants, Ms Hu of Bao-trans expected her company would experience no growth in volume for its parent, even though Baoshan's production was rising.

  K. Y. Tang, deputy managing director of Island Navigation and president of Bao Island, said: ''If you look at the total cargo size of Baoshan, one company cannot handle everything.

  ''Baoshan wants to create some kind of balance. Competition will not be a negative factor.''   Bao-trans and Bao Island operate quite differently.

  Bao-trans was created virtually without assets. In 1992, it used chartered services to ship and deliver commodities. The next year, it acquired a 38,000-deadweight vessel built in 1977.

  In partnership with Neptune Orient Lines of Singapore, it bought 70 per cent of a 135,000 dwt OBO (oil bulker ore) built in 1983.

  However, Ms Hu hoped to replace the vessels with two new buildings in two to three years.

  She said: ''We have no purchase plans in 1994 because of cash flow problems.''     Bao Island, on the other hand, already had to its name two vessels at its inception.

  It also has on order two bulkers for delivery in 1995 and 1996, according to Mr Tang.

  It is hard to tell whether the central government could have afforded the capacity provided by these joint ventures and new subsidiaries.

  However, China's economic liberalisation has undoubtedly enabled to be done privately what might have strained the public treasury.



Beijing opens the door for more shipping ventures