The provincial government of North China’s Hebei province is encouraging major local steelmakers to make additional investments in overseas markets and to build steel industrial parks there, a pursuit which synchronises with the central government’s Belt & Road Initiative (BRI) and which could help stimulate industry restructuring in the domestic steel market.

According to a late December release on the Hebei Government’s website, by the end of 2020 Hebei province hopes that local steelmakers under its jurisdiction will have expanded their steel making capacity overseas to 12 million tonnes/year, thanks initially to the establishment of steel making bases abroad by leading Chinese steel enterprises.

“The demand for steel in the global market should remain robust, with apparent steel consumption worldwide in 2020 continuing to hover around 1.6 billion tonnes,” the provincial government said, explaining that a buoyant market environment would make it less financially risky for Chinese steelmakers to ‘walk out’ globally and invest in overseas projects.

The Hebei Government has decided to make full use of the province’s industrial advantages, the release said, pointing out that Hebei hosts eleven steelmakers whose crude steel production exceeds 5 million tonnes/year. It noted too that annual production of HBIS (Hebei Iron & Steel) Group, Shougang Group, Jingye Steel and Jinxi Steel even surpasses 10 million tonnes.

As of now, steel mills based in Hebei have built or acquired eight steel projects offshore whose total steel making capacity is 6.35 million tonnes/year. Moreover, with these existing overseas projects providing the foundation, Hebei is encouraging the construction of steel-related industrial parks abroad including the Delong Steel Indonesia Tsingshan Industrial Park in Sulawesi, Indonesia, and the Xinwuan Steel Malaysia Industrial Park in Sarawak, Malaysia.

For example, in 2016 HBIS Group acquired Serbia’s Smederevo Steel, a steelmaker with 2.2 million t/y crude steel capacity and whose seven straight years of losses the Chinese mill was able to quickly reverse, the announcement noted. The Hebei government hopes to utilize the successful experience of Hesteel Serbia Iron & Steel and the geographic advantages of its proximity to ports to establish the Sino-Serbia Friendly (Hebei) Industrial Park. Serbia is also a major country along the BRI route.

“China’s One Belt One Road (policy) has encouraged domestic enterprises to invest overseas and cooperate with countries that have embraced the initiative,” a Beijing-based steel analyst commented. “And this is occurring at a time when domestic steel producers are barred from newly-adding steel capacity at home so it’s not surprising that Chinese steelmakers have an increasing interest in overseas projects.”

Nevertheless, he added a note of caution to the Hebei Government’s announcement. “Sometimes, unexpected issues such as funding problems crop up when projects advance, so whether those industrial estate projects for steel will successfully come on stream or not is unclear,” he warned.