Steelmaker bets big on diversification

Headquartered in Tangshan, Hebei province in North China, Tangsteel is a Chinese steel company with 70 years of history.

In June, the company received a $270 million structured steel prepayment loan from six international banks led by Deutsche Bank. The loan facilitates the prepayment of $270 million of its steel exports to global steel producer Duferco, the principal operating trade subsidiary of Duferco International Trading Holding SA, a global steel trading company based in Luxembourg.

Duferco is both the exclusive off-taker of steel products exported under this prepayment arrangement and a 10-percent risk guarantor.

"With this loan, Tangsteel is pioneering the use of overseas funds in the domestic iron and steel industry to expand its international business," said Yu Yong, general manager of Hebei Iron and Steel Group.

The company's steel output in 2012 was about 16 million tons. The steel products for automobile use accounted for a very small portion of the total output.

"Tangsteel's automobile-use steel production is still at an early stage currently," said Hu Yanping, a steel analyst with Umetal.com, a domestic industrial information provider. "The company has made much progress in steel products for electronic appliances in recent years."

"The automobile-use steel sheets represent high-end products with good quality. We have improved our capability levels by producing export-quality products," said Sun. "However, it is not our only focus."

The decline in Japanese automobile sales due to the recent political disputes has not affected Tangsteel, as Japan is not a major export market for the company, said company officials.

Tangsteel's overseas focus does not just end with owning expensive high-end manufacturing equipment and production lines, said Yu of Hebei Iron and Steel Group.

"Our strategy is to improve the quality of existing products and make them the market toppers, be it for automobile use or for construction or electronic home appliances," he said.

"The market is changing all the time," said Sun at the corporate culture department of Tangsteel. "We cannot stop the change of the market, but we can improve our products to satisfy the market and increase our competitiveness."

 

 

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