Baosteel closes loss-making Corex complex in Shanghai
Staff Reporter 2012-09-24 16:24
A view of a Shanghai factory run by Baosteel Group. (Photo/Xinhua)
China's Baoshan Iron & Steel Corp (Baosteel) recently suspended operations at its Luojing complex in Shanghai which was making losses on account of the adoption of advanced technology, according to the weekly Chinese-language newspaper Investor Journal.
The complex, built to accommodate the company's operations, relocated from Shanghai's Pudong area to make way for the 2010 World Expo. It has two furnaces, both using the Corex smelting process for gasifying non-coking coal to produce pig iron.
Furnace No. 1, which began production towards the end of 2007, was shut down in July 2011, while furnace No. 2 was suspended along with the complex on Sept. 10, although it only began production early last year, a worker at the complex said.
The firm, which is Baosteel Group's listed holding company, bought the Corex project from Shanghai Pudong Iron and Steel Co, another subsidiary of the steel group, in April 2008.
However, the Luojing complex, which was sold for 14.34 billion yuan (US$2.27 billion), had been posting losses since its acquisition by Baoshan. The worker told the newspaper that the operations of the recently closed furnace No. 2 had caused a monthly loss of 100 million yuan (US$15.8 million).
Moreover, the suspension of the Luojing complex on Sept. 10, the newspaper noted, occurred before Baoshan could make the final 20% payment for the project by the end of this year.
According to the group, the suspension of operations in Luojing is part of its restructuring plan between 2012 and 2017, under a deal signed with the Shanghai city government to reduce iron and steel capacities, along with coal energy consumption.
The Luojing site, along with the group's subsidiaries based at the Wusong industrial park in the city, would shift its focus towards developing new material and green industries promoted by the government, the group added.
The two Corex furnaces would be moved to another Baosteel group's complex in Xinjiang, the worker said, where the dry weather is more suitable for advanced production.
The restructuring, the newspaper said, was a result of declining steel prices because of the excessive capacity in the country. Steel prices fell from over 6,000 yuan (US$952) per ton in 2008 to the current 3,400 yuan (US$539) per ton, a steel trading company owner said.
Meanwhile, several stock investors were disappointed that the Corex project had caused a loss of over 20 billion yuan (US$3.15 billion) for Baoshan and undermined shareholders' rights with an intra-group transaction.
While plans to relocate the Corex project to Xinjiang remained unclear, a steel sector analyst said Baoshan had definitely suffered a loss even though the company had been reluctant to reveal the actual extent.
