China is pushing for reforms in the iron & steel sector and a new wave of production cuts are being discussed. For many private companies in the industry, it's expected to be a testing time.
This is going to be a tough year for Wang Wenan. He is the owner of one of the largest iron & steel companies in Wuan county of Handan in Hebei Province. But he isn't sure whether his plants will survive this year.
"At the end of 2015, there was a time when our cash flow could only last for a few days. Now we suddenly have to move out of the city, which will cost tens of billions of yuan. It is a huge pressure," Wang said.
There are five iron & steel plants in the city of Wu’an. They are currently being forced to relocate outside of the city by the government, while at the same time, reducing production capacity. With the price of steel hitting record lows, the city is cutting one third of its production.
"There have been companies running into trouble. If we leave them be, they will be knocked out of business, but if we are going to make them reduce capacity, there comes a series of problems," Zhang Chenliang, party secretary of Wuan City, Hubei province, said.
Employment is the top concern. One of Wang’s blast furnaces was shut down in 2015. He had been paying 800 people that had been laid off for nearly a year.
As a civil cooperation, Wang Wenan’s company is no match for state-owned companies in technology and the ability to expand into overseas markets. There are many private companies in the iron & steel industry that are facing the same situation as Wang. Industry reforms are key to helping those civil companies ride out the difficulties ahead.
In desperation, Wang is now seeking help from the Metallurgical Corporation of China to move his plants abroad.
"China’s metallurgical industry, after decades of development has made remarkable improvement in its level of craft skills, equipment manufacturing, scale and influence. And we are happy to work with domestic companies to expand our international market," Zhang Zhaoxiang, deputy secretary of Metallurgical Corp. of China, Ltd., said.
Wang Wenan is preparing to use the income from selling the land and government subsidies to pay the laid off workers. In the meantime he is bidding for a production plant in Pakistan.
"The Industrial and Commercial Bank of China and the Silk Road Fund is going to provide me with half of the funds needed. I am mortgaging the domestic plant as well," Wang said.
Wang is throwing everything into this deal, because he knows staying here will mean bankruptcy and while he knows the risks of going out, it may just give him a chance.
Source: CNTV