On September 27, Baosteel issued a public announcement regarding the rumor that the “Luojing Plant stopped production and stops losing†recently. It acknowledged that it had transformed the Luojing region into an economic operation mode and suspended production so as to avoid further expansion of its operating losses. Due to sluggish market demand and large operating cash flow losses, this Luo Bao project, which Baosteel purchased more than 14 billion yuan from Baosteel Group in 2008, has come to a standstill.
Discontinued rumors come true
Recently, the media reported that “the leading product of Baosteel Co., Ltd. Luojing Plant is the high-tech and high value-added special special plate and ship plate that are in short supply in the market. The project started in less than five years and was in a dilemma of continuous loss. Stop production now." For a time, the rumors of Baosteel's “Luoqi plant shutdown production†were rampant.
According to the data, due to the construction of Shanghai World Expo, Baosteel Pudong Iron and Steel Co., Ltd. was relocated to Luojing District in Baoshan District. The project covers an area of ​​approximately 3.22 square kilometers. The Luojing project of Baosteel was approved for construction in 2005. On November 24, 2007, the Luoxin project COREX furnace was put into operation.
Baosteel Co., Ltd. issued an announcement at the end of 2007. The related assets of the Luojing project acquired by the company include a set of COREX-C3000 smelting reduction furnace, a 150-ton converter, refining equipment (including RH and LF furnaces), and a set of slab continuous casting. Machine, a set of 4200mm plate mills, and self-produced power stations, power equipment and power pipe networks and Other ancillary facilities and fixed assets. This announcement from Baosteel Co., Ltd. states that the total purchase price exceeds RMB 14 billion, and it adopts a five-year instalment interest-free payment method, which pays 20% of the total price each year.
However, five years after the Luojing project was put into production, Baosteel's plan changed again. On July 4th this year, the Shanghai Municipal Government signed an agreement with Baosteel Group to promote the structural adjustment of Baosteel's Shanghai Baoshan Iron and Steel Industry. The content of the agreement is that Baosteel will gradually adjust and compress some of its production capacity in Shanghai in the next five years, and adjust its steel production capacity to account for about 30% of Baosteel's headquarters. The major adjustments are Baosteel's stainless steel and Luojing in Shanghai. The plan shows that “the Luoqi region will gradually transform itself and focus on the development base of strategic emerging industries such as new materials, energy conservation and environmental protectionâ€.
Whether it is the loss of rumors or the adjustment of industrial function planning, it has become a fact that Baosteel's Luojing plant has stopped production. In an announcement, Baosteel Co., Ltd. stated that it comprehensively considered the external factors of the industrial structure adjustment in Shanghai Baoshan area and the weak demand in the downstream plate market, and the Luoshu area's cost competitiveness is weak in the Shanghai area due to its own process technology characteristics, resulting in operating cash flow at the current stage. With a large loss, the company will now convert the Luojing area into an economic operation mode and suspend production.
Difficult to high cost pressure
“China's plate consumption will increase significantly, and it is expected that the total demand will increase from the current 40 million tons to nearly 80 million tons by 2012.†This is the medium-thickness Baosteel Co., Ltd. when it plans to acquire Luojing Project in 2007. The optimistic outlook of the board market, however more than four years later, with the slowdown of economic growth and insufficient demand for products, the plate market size has been difficult to achieve the goal of high growth.
Analyst Li Hongliang of Guotai Junan believes that under the raw material cost structure in Shanghai, Baosteel’s Luojing Project is difficult to make profit, while the low-cost lump mine and coal in Xinjiang are more suitable for COREX, and it is not ruled out to sell and relocate to Baosteel Group’s Bayi Steel Company in Xinjiang in the future. It is possible to solve the problem of Luo Hao.
Industrial Securities analysts said that the high cost of Luojing plant project, the furnace is a cutting-edge technology, is to track advanced technology, but not yet large-scale, due to higher raw material requirements, so the localization is still more difficult. At the same time, overcapacity in the steel industry has been evident in recent years, and prices and demand have been declining at the same time, which has aggravated the difficulty of the Luojing project.
Discontinued rumors come true
Recently, the media reported that “the leading product of Baosteel Co., Ltd. Luojing Plant is the high-tech and high value-added special special plate and ship plate that are in short supply in the market. The project started in less than five years and was in a dilemma of continuous loss. Stop production now." For a time, the rumors of Baosteel's “Luoqi plant shutdown production†were rampant.
According to the data, due to the construction of Shanghai World Expo, Baosteel Pudong Iron and Steel Co., Ltd. was relocated to Luojing District in Baoshan District. The project covers an area of ​​approximately 3.22 square kilometers. The Luojing project of Baosteel was approved for construction in 2005. On November 24, 2007, the Luoxin project COREX furnace was put into operation.
Baosteel Co., Ltd. issued an announcement at the end of 2007. The related assets of the Luojing project acquired by the company include a set of COREX-C3000 smelting reduction furnace, a 150-ton converter, refining equipment (including RH and LF furnaces), and a set of slab continuous casting. Machine, a set of 4200mm plate mills, and self-produced power stations, power equipment and power pipe networks and Other ancillary facilities and fixed assets. This announcement from Baosteel Co., Ltd. states that the total purchase price exceeds RMB 14 billion, and it adopts a five-year instalment interest-free payment method, which pays 20% of the total price each year.
However, five years after the Luojing project was put into production, Baosteel's plan changed again. On July 4th this year, the Shanghai Municipal Government signed an agreement with Baosteel Group to promote the structural adjustment of Baosteel's Shanghai Baoshan Iron and Steel Industry. The content of the agreement is that Baosteel will gradually adjust and compress some of its production capacity in Shanghai in the next five years, and adjust its steel production capacity to account for about 30% of Baosteel's headquarters. The major adjustments are Baosteel's stainless steel and Luojing in Shanghai. The plan shows that “the Luoqi region will gradually transform itself and focus on the development base of strategic emerging industries such as new materials, energy conservation and environmental protectionâ€.
Whether it is the loss of rumors or the adjustment of industrial function planning, it has become a fact that Baosteel's Luojing plant has stopped production. In an announcement, Baosteel Co., Ltd. stated that it comprehensively considered the external factors of the industrial structure adjustment in Shanghai Baoshan area and the weak demand in the downstream plate market, and the Luoshu area's cost competitiveness is weak in the Shanghai area due to its own process technology characteristics, resulting in operating cash flow at the current stage. With a large loss, the company will now convert the Luojing area into an economic operation mode and suspend production.
Difficult to high cost pressure
“China's plate consumption will increase significantly, and it is expected that the total demand will increase from the current 40 million tons to nearly 80 million tons by 2012.†This is the medium-thickness Baosteel Co., Ltd. when it plans to acquire Luojing Project in 2007. The optimistic outlook of the board market, however more than four years later, with the slowdown of economic growth and insufficient demand for products, the plate market size has been difficult to achieve the goal of high growth.
Analyst Li Hongliang of Guotai Junan believes that under the raw material cost structure in Shanghai, Baosteel’s Luojing Project is difficult to make profit, while the low-cost lump mine and coal in Xinjiang are more suitable for COREX, and it is not ruled out to sell and relocate to Baosteel Group’s Bayi Steel Company in Xinjiang in the future. It is possible to solve the problem of Luo Hao.
Industrial Securities analysts said that the high cost of Luojing plant project, the furnace is a cutting-edge technology, is to track advanced technology, but not yet large-scale, due to higher raw material requirements, so the localization is still more difficult. At the same time, overcapacity in the steel industry has been evident in recent years, and prices and demand have been declining at the same time, which has aggravated the difficulty of the Luojing project.
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