Shagang: forging a path to success

Strong determination and innovation focus bring rich dividends for Shagang Group

Jiangsu Shagang Group Chairman Shen Wenrong

Shen Wenrong is not afraid of challenges or changes. Rather, he sees it as the game-changer for Jiangsu Shagang Group to stay ahead of its peers in the global markets.

"Every challenge is a new starting point. It is the spirit of perseverance and persistence that has helped us overcome many challenges and made us into what we are today," says Shen, chairman of Shagang Group, China's largest private steelmaker.

Like the innovative, record-breaking steel products rolled out by the company in the past 37 years, Shen has successfully conquered many challenges and difficulties to transform Shagang Group from a small cotton factory into one of the most competitive steelmakers in the world.

This year the group was ranked 346th in the Fortune Global 500 list with sales of 207.5 billion yuan ($33.2 billion; 25.4 billion euros).

Dressed in a plain suit, the 66-year-old tycoon says in a firm voice, "withstanding the gloomy domestic steel market, tapping the overseas markets and developing non-steel business are the foremost challenges and transformation for us now.

"I hope that after these changes, Shagang will figure in the Global 300 list in terms of both profits and revenue in the next 10 years," says Shen.

Shen is a man full of energy. He seemingly fills every hour of the working day with work that he and his team work even on Saturdays. The busiest time for Shen, as he says, is between 9 pm to 11 pm.

"At this time, I can summarize the experiences and lessons that I learned during the day in a highly efficient manner," he says.

Without Shen's constant efforts and business acumen, Shagang Group would have long gone into bankruptcy considering the formidable challenges and difficulties it faced since its inception, says Chen Xiaodong, managing executive director of the board of directors of Jiangsu Shagang Group and an associate of Shen for over eight years.

The steel industry in China is in deep water and Shen knows it only too well. Shen, vice-chairman of the China Iron and Steel Association, says the industry has entered one of the most difficult times in its history, "the toughest period for us since we started business in 1975".

"What is worse is that the hard times will last for at least one and a half years more. The winter of the industry has come," says Shen in his quick-toned Suzhou accent.

In the past 30 years, stimulated by the fast development of China's economy and huge infrastructure and property investment, China's steel industry has grown rapidly. But this has also led to severe overcapacity, Shen says.

The China Iron and Steel Association says that of 81 steelmakers it tracks, 38 recorded losses in the first seven months of this year. The losses totaled 16.9 billion yuan compared with losses of 400 million yuan in the corresponding period last year.

China's crude steel output was a little less than 684 million metric tons last year, compared with about 500 million in 2008, according to Lange Steel Information Research Center, an industrial consultancy in Beijing.

An avid reader of books on the history of the world's largest corporations, Shen says spreading wings in overseas markets is one approach for the group to pass the winter.

"Due to the faltering domestic market, it is important for Shagang to tap the overseas market in the next 10 years," he says, adding that more overseas branches are being planned, even as the company will continue to scout for active merger and acquisition opportunities.

Revenue from overseas markets accounts for 10 to 12 percent of the overall revenue now, and will go up to 15 percent of the total turnover by 2015, he says.

Shagang exported 5 percent of its steel products last year, even as it remained one of the top three domestic steel producers.

"By 2015, we expect exports to reach around 10 to 15 percent," Shen says adding that the company will soon set up offices in major Asian markets like Singapore, Malaysia and Indonesia. At the same time we will also scout for suitable merger and acquisition opportunities and also grow our sales channels further."

Shen says the company will focus more on the Asian markets before it spreads its wings in the European and the US markets. "The competition is fiercer in Europe and the US. We will concentrate on the Southeast Asian market till 2015," Shen says.

"Once we are confident that we have a strong presence in Asia, we will move on to other markets and also look for alliances with suitable partners.

"We are in constant contact with some steel industry-related companies in the EU. It will be helpful to us when we start making high-end products for these markets."

So far, the group has about 500 foreign clients. Its overseas assets totaled about 1 billion yuan last year, with most of them in Australia.