Metallurgical companies in China are expanding production overseas

Chinese steel companies turned their attention to overseas markets with the aim of building production facilities after focusing on the acquisition of mines. Recently, it was reported that the Chinese steel group Anshan (Ansteel) is planning to build a steel plant with an annual production of 85 million tons in Morowwali in central Indonesia. However, an Ansteel employee told China Business News that he did not know the details of the project.

However, according to Zhang Ling, an analyst with Lange Group, which provides information on the steel sector, Chinese steel companies are studying the needs of local overseas markets when planning their plants. He said: "For example, Indonesia has a strong demand for steel products due to its rapid economic growth. The automotive, shipbuilding and equipment sectors will become the main drivers of steel demand."

The Nanjing Metallurgical Group already entered into a joint venture with Indonesian PT Gunung in January 2014 to build a steel plant in Medan that will be able to produce 500,000 tons of steel products per year. In the first phase of the project, $ 80 million was invested in Medan with the goal of building a plant within three years. Despite Indonesia's easy access to coal from Australia, the main challenge facing Chinese companies is to bridge infrastructure gaps in certain areas of the country. “Some islands are not electrified and require rail and road construction,” Zhang said.

Zhang also said that South America is a tougher market due to strict technological, environmental and labor laws, which are difficult for Chinese processing companies to do even at home. Hebei Province, which has the highest concentration of steel mills in China, is also encouraging local companies to expand production overseas, especially in Southeast Asia, West Asia and Africa. Several companies from Hebei province have already launched or planned projects in Indonesia, Thailand and Laos. The province's largest steelmaker, Hebei Iron and Steel Group, has signed a contract with the Industrial Development Fund of South Africa to build a plant in South Africa with an annual capacity of 5 million tonnes.