Shen Wenrong has transformed the Shagang Group into one of the most competitive steelmakers in the world. A company that was once a small player is now number 23 world-wide. Shen is not only President and Chairman of the Board, but also Party chief of the Jiangsu Shagang Group.
"With further improvements in competitiveness achieved through reorganization, mergers and acquisitions, I hope that by the time I am 70, Shagang will have raised its annual production capacity to 50 million tons," said the 61-year-old in an interview with Nanjing-based Xinhua Daily in June this year.
Under Shen's leadership, Shagang's strategy has been one of leapfrogging development and cost cutting. No effort has been spared in introducing advanced equipment, improved facilities and even complete production lines from overseas. Such moves have attracted much attention from others in the industry. One high profile example was Shagang's acquisition of Thyssenkrupp's Hoesch steel mill in Dortmund.
In 2001 Shagang had plans to increase profitability through an entry to the quality slab market. So when the news broke that Hoesch was to be sold off due to high costs and lack of competitiveness, Shen flew over to conduct a field study. He knew that Thyssenkrupp's automobile steels enjoyed an excellent reputation in Europe. This was the ninth largest steelmaker in the world and its products were highly thought of by world-famous companies like Benz and Volkswagen. Back in those days, very few companies in China had the technology necessary to produce automobile steels.
Shen planned carefully. Shanggang is not far from Shanghai where there was a joint venture with Benz as the overseas partner. Here Wolfsburg automobiles would continue to use quality slab steel produced according to the advanced Thyssenkrupp technologies. The only difference would be that the steel production would be carried out in the Yangtze River Delta in China.
After strenuous negotiations, Shagang purchased all the facilities at Hoesch for 220 million yuan (about US$29 million). Nearly 1,000 Chinese workers moved over to Dortmund. In just one year they moved 250,000 tons of equipment to China. They also had 40 tons of documents necessary for the intricate reassembly process. It was the biggest industrial relocation in over half a century. What's more it was finished ahead of schedule, a full two years earlier than the German company had initially estimated.
Shen brought in professionals from Voestalpine AG to assess, redesign, and improve the facilities. Taking just four years and 20 billion yuan (about US$2.6 billion) this established an iron and steel making operation turning out 6.5 million tons annually through a continuous casting and rolling process. Earlier estimates for establishing a production line on this scale had been put at eight years and 30 billion yuan (about US$4 billion).
James Kynge is a former China Bureau Chief at the Financial Times. In his bestseller entitled China Shakes the World he wrote that Horde on the Ruhr had become one of the first communities on earth to feel the convulsive force of a rising China.
The acquisition rapidly raised steel production at Shagang to 10 million tons and changed its product base. Previously it had concentrated on bars, rods, wire rods and other primary iron and steel products. Shen's leadership has brought technical innovation and seen equipment and facilities improve rapidly to meet international standards.
"Without its own core technologies, Shagang cannot become one of the best steelmakers in the world," Shen said. "Though our production capacity is now approaching that of Korea, our Research and Development (R&D) capabilities still lag far behind our Korean counterparts.
But Shen is not a man to give in easily. Last year, he decided to spend 500 million yuan (about US$66 million) establishing the Shagang Iron and Steel Research Institute in Jiangsu Province. He has invited many internationally renowned professionals to work there. In the future, its Technology Center and postdoctoral programs will focus on introducing new technologies. Meanwhile, the Research Institute will concentrate on the innovative and advanced technologies necessary to maintain a competitive position.
Shagang is located in the southern Jiangsu where land is highly priced. It is not feasible for the company to further expand its production there because of limited land resources and environmental considerations. The steelmaker needs to achieve future development through acquisitions, mergers and reorganizations.
Huaigang has become Shagang's first large-scale acquisition in line with its strategy of continual, rapid, efficient, and sustainable development. As Huaigang is the biggest steelmaker in the northernJiangsu, this represents a key step taken by Shen to further expand his company. The reorganized company was officially established on December 18, 2006. It will focus on quality and special steels with a production capacity of over 2 million tons. It has become Shagang's base for the production of special steels. With the big bar project introduced to Huaigang from Italy, it is estimated that Huaigang's production capacity of special steel will reach 3 million tons.
According to Shen, the group operating from its Shagang headquarters is set to grow in strength, expand its operational base, improve product quality, and extend its scale by acquisitions and mergers. Over the next three years, Shagang will seek acquisitions to increase its steel production capacity by over 10 million tons.
As a high energy-consuming industry, the iron and steel sector is a key target for state-level macro-control policies. Therefore, Shen attaches a high importance to the study of and compliance with state industrial policy. He is ready to invest more in recycling, energy conservation, and emission and drainage outflow reduction. "Businessmen must be fully aware of state policies and guidelines," said Shen. "They must bear in mind what will be supported by the state, and what is prohibited."
During the 2001-2005 period, Shen proposes to establish an "environmental-friendly steel city". Over the last 5 years, 3 billion yuan (about US$0.4 billion) has been invested in conserving energy, reducing emissions and drainage runoff, rationalizing the use of resources, and creating a recycling economy within Shagang. What's more, not only has the environment benefited but these essentially conservational measures have also brought the company an increase in annual profits of over 1 billion yuan (about US$0.13 billion).
"We must protect the environment whether it is profitable or not for the company. 3 million yuan (about US$0.4 million) is invested every year in drainage disposal," Shen said. "This investment is a must. We are inviting trouble if we ignore environmental protection."
Elected as a delegate to the Party's national congress for the second time, Shen clearly feels the responsibilities that are resting on his shoulders. "Sound development of the company is my biggest contribution to China," he said. Two strategic issues are now occupying his attention. One is what area of operations should Shagang focus on? The other is succession planning for the leadership at Shagang, projecting ten years into the future.
"Both these issues require immediate attention. If the wrong decisions are taken now, missed opportunities will mean huge losses for the company, the nation, and for society."
(China.org.cn, 17thcongress.org.cn October 8, 2007)
