In 2012, Baosteel realized an annual profit of RMB 10.4 billion despite the sluggish global iron and steel market and losses suffered extensively throughout the Chinese iron and steel industry, including 31% from iron and steel operations, 37% from diversified industries and 32% from corporate headquarter and capital gains. This reflects healthy and reasonable industry structure and relatively strong risk resistance of Baosteel. The review results of Baosteel’s credit rating by Standard & Poor's, Moody's and Fitch indicate that Baosteel has managed to sustain the highest credit rating among the global iron and steel enterprises.

In 2012, Baosteel focused on the management and control of strategic and investment risks, identified the direction of industrial restructuring in Baoshan region, optimized the feasibility study plan for Baosteel Zhanjiang Iron & Steel Project and regulated operating risks at their sources. In face of the harsh market environment, various departments strengthened their risk control in supply chain operations including inventory, capital, exchange rate and interest rate, responded quickly to market changes, endeavored to mitigate the impact of external systematic risks such as “Diaoyu Island Dispute" and “inadequate liquidity of steel traders” and handled all kinds of emergencies in a timely manner. With joint efforts from the Board of Directors, management and all employees, key and major risks remained fundamentally under control.

Supported by the synergetic development of the related industries, Baosteel has adhered to its established strategy with iron and steel as its core business, spared no efforts in the continuous establishment of a highly efficient iron and steel supply chain and taken a systematic approach in the implementation of the large-scale restructuring of iron and steel assets and cross-regional adjustment in production distribution. The Corporation has been unhesitant in the elimination of all inefficient and ineffective assets and continued to set up new production bases and develop new production systems in pursuance of the established strategy with the aim to achieve the highest efficiency in the world. All diversified industries are striving for industry leadership in their respective fields.

Zhanjiang Iron & Steel Project

The construction of Zhanjiang Iron & Steel is one of the specific actions taken by Baosteel to implement the National “Twelfth Five-Year” Plan for the iron and steel industry and a key breakthrough in the new “Two Deltas and One Borderland” development stage and the realization of the Pearl River Delta presence of Baosteel’s primary operation in iron and steel as well as an important platform for Baosteel’s secondary entrepreneurship. On May 24th, 2012, the Zhanjiang Iron & Steel Project was approved by the state government. On September 17th, 2012, the general meeting of Baosteel Co., Ltd. adopted a resolution that Baosteel Co., Ltd. would serve as the main investing entity in Zhanjiang Iron & Steel Project and that the registered capital of Zhanjiang Iron & Steel would be increased to RMB 8 billion upon completion of the acquisition. This acquisition of Zhanjiang Iron & Steel Co., Ltd. will facilitate the adequate utilization of Baosteel’s existing technology and talent resources and benefit the construction and progress of Zhanjiang Iron & Steel Project. The designed annual production capacities of crude steel and steel products of Zhanjiang Iron & Steel Phase I Project are 8.71 million tons and 6.37 million tons respectively.

Iron and Steel Industrial Restructuring in Baoshan Region

The signing of theCooperation Agreement for Iron and Steel Industrial Restructuring in Baoshan Region between Shanghai Municipal Government and Baosteel on July 4th, 2012 indicated the official start of the iron and steel industrial restructuring in Shanghai. In this restructuring process, Baosteel actively cooperated with the master urban plan of Shanghai and adopted the work approach of “Development through Reduced Capacity, Increased Efficiency and Restructuring” to restructure the enterprises in the industrial parks of Baoshan and Wusong as well as the Luojing Production Base in Shanghai. Upon completion of the scheduled restructuring tasks, it is estimated that the steel production capacity in Shanghai will be reduced by approximately 6.6 million tons and corresponding reduction in energy consumption will be approximately 3 million tons of coal equivalent. As a core enterprise of Baosteel Group, Baosteel Co., Ltd. will focus on the carbon steel plate business in which it enjoys the differentiation advantages, continue to step up input into R&D, gather outstanding talents, enhance the operational efficiency of the enterprises and improve the energy conservation and environmental protection standards and enhance and forge an elite iron and steel production base of Shanghai. Currently relocation of Corex iron-making facility to Xinjiang Bayi Iron and Steel, restructuring of the stainless steel production system and other tasks are being carried out in an orderly manner.

Nanjiang Baicheng Iron & Steel Base Project of Bayi Iron & Steel

In 2012, the construction of Nanjiang Baicheng Iron & Steel Base and its supporting projects has successfully met the planned milestones. By the end of the year, the integrated stock yard area has commenced operation and the joint commissioning for the sintering area has basically been finished. The installation of equipments in blast furnace area is being completed and individual commissioning of such equipments has commenced. The commissioning and installation of primary equipments in the steel-making and steel-rolling areas are being carried out as scheduled. The project is expected to commence operation in mid 2013.

Overseas Shearing Centre

For the purpose of providing strategic users overseas with better services, satisfying individualized needs, strengthening the management of overseas customer channels and enhancing the competitiveness of Baosteel’s auto sheets in overseas markets, the Corporation has set forth the overseas marketing strategies and planning, planned and implemented a series of overseas shearing, distribution and processing centre projects. After the acquisition of the Italian shearing centre in 2011, the Corporation has set up joint ventures and established shearing, processing and distribution centers in South Korea, India and other countries in 2012. These projects are progressing in an orderly manner.

Baosteel Co., Ltd. Silicon Steel Follow-up Phase II Project

In order to enhance the product standards, optimize product variety structure and better satisfy users’ needs, Baosteel Co., Ltd. decided in 2010 to develop the Silicon Steel Follow-up Phase II Project with a designed production capacity of 100,000 tons of HiB oriented silicon steel. The project has officially commenced construction in June 2011 and is expected to commence operation in July 2013. By then, the total oriented silicon steel production capacity of Baosteel Co., Ltd. will reach 300,000 tons/year.

Thailand Steel Pipe Project

Baosteel has set up a joint venture and developed a seamless steel pipe project in Thailand. The project officially commenced construction in February 2012 and the first batch of steel pipes was successfully rolled in January 2013. This project will facilitate Baosteel’s further expansion into the international steel pipe markets.

Vietnam Can-making Project

For the purpose of further expansion into overseas markets, Baosteel has constructed a new can-making project in Vietnam with designed annual production capacity of 600 million cans. The project has commenced trial production since November 2012.

Jiangsu Fine Wire & Cord Project of Baosteel Metal Jiangsu

Located in Haibao Metal Industrial Park in Haimen City of Jiangsu Province, Jiangsu Baosteel Fine Wire & Cord Project specializes in the production of steel cords for auto tires and sawing wires for the photovoltaic industry. The construction of the project is divided into two phases with Phase I commencing construction at the end of 2011 and commencing operation at the end of 2012. Upon full production, the annual production capacity of fine wires and cords will reach 50,000 tons, serving as a key link in the wire product industry chain between steel wire rods to finished products and indicating that Baosteel has officially entered the field of high-grade wire products.

Baosteel Develops Mineral Wool Project

Baosteel has applied its philosophy of environmental-friendly operation in practice and constantly improved the integrated recycling value of solid waste. In 2012, Baosteel constructed a pilot production line of granular wool from blast furnace hot slag with annual production capacity of 20,000 tons and the relevant supporting facilities in Ningbo, Zhejiang Province. The hot test run of the granular wool pilot production line is scheduled in September 2013. The construction of this project will expand the scope of solid metallurgic waste recycling and develop energy-conserving and environmental-friendly green materials.

Industrial Gas Operation

In order to realize the transformation from manufacturing to services set forth under the new planning cycle, Baosteel prioritized the industrial gas operation as one of the key strategic operations, acquired and integrated the coking and air separation assets as well as oxygen, nitrogen and argon gas operations in Shanghai in June 2012. The project will facilitate the quick improvement of the market position of Baosteel's industrial gas operation in Shanghai and the nearby regions and optimize the allocation of gas resources in Shanghai's coking region.

Baosteel, accelerating the integration of technological resources, has established a technological innovation system with its own characteristics and sped up the enhancement of the overall technological capabilities of the Corporation through institutional reform and system innovation in accordance with the requirements of the Corporation’s strategic development. The Corporation has formed a research and development system under which “production-marketing-research” and “industry-academy-research” are closely integrated through the research institute as the main entity, integrated engineering system combining production, R&D, design and equipment on the platform of engineering projects, and a continual improvement system focusing on the production site and characterized by stable enhancement and lean operation.

In 2012, Baosteel, under the guidance of its new development planning cycle, has adhered to the strategy of technological leadership and actively explored new industries and been commended by the country for a series of achievements with the support of its environmental-friendly operations with innovation, including the China Metallurgical Science and Technology Special Prize for the “Development and Industrialization of Low Temperature High Magnetic Induction Grain-oriented Silicon Steel Manufacturing Technology” and the Second Prize of National Awards for Scientific and Technological Progress for the “Development and Application of Two-piece Tinplate for Pop-top Cans”. Baosteel has been jointly recognized by the Ministry of Industry and Information Technology and the Ministry of Finance as a "National Technology Innovation Model Enterprise”.

Technological Innovation System

Optimization of organizational system - On June 19th, 2012, Baosteel set up its Central Research Institute to integrate the R&D resources of the Group and make drastic changes to the R&D system and operation mechanisms.

Synergetic promotion through technologies - Baosteel supported the successful implementation of the cold-roll acid-washing and medium thickness plate, supported Ningbo Iron & Steel in realizing enhancement of manufacturing capability and acquired the capability to manufacture pipeline steel as well as the permit for the manufacturing of the pipeline steel below X70 grade and supported the significant cost improvement in Shaoguan Iron and Steel region.

R&D and Innovation Capacity

 (1) Baosteel has achieved major progresses in the research and development of key new products and technologies. Baosteel was the first in the world to release the quenched and partitioned steel (980MPa grade Q&P cold-rolled steel sheet), which was one of the third-generation advanced high-strength steel technological approaches. The Corporation realized mass production of high-Si high magnetic induction oriented silicon steel (3.35% Si) and trial mass production of top-grade non-oriented silicon steel (B35A200).  The application of Grade Super 13Cr Tube products with the largest specification (206.38×16mm) in China at Tarim Oilfield was also successful. Baosteel-made 690U pipes were successfully connected to No.1 evaporator of Fangchenggang nuclear power plant No.1 generator unit. The first unit of materials for ultra-supercritical units (Super 304 and HR3C pipes) was sold. Stainless steel for auto exhaust system was certified by automakers such as Nissan, Toyota and Honda, establishing Baosteel as a qualified supplier. Significant progresses have been achieved in the researches on key technologies, such as the third generation oxide metallurgy technology, composite rolling technology, new scale-removal and new generation of energy-conserving high-efficiency continuous heat treatment. The industrialization of the thin-strip continuous casting and rolling technology has progressed successfully, and currently the construction of industrialized production lines has commenced.

 (2) Baosteel has supported energy conservation and emission reduction efforts through technological innovation, accelerated researches on technologies such as the waste heat recycling for waste gas from sintering, integrated utilization and advanced treatment of waste water, production of mineral wool from blast furnace hot slag and steelwork exhaust-to-ethanol. Among these, waste heat recycling technology for waste gas from sintering, named by NDRC as a Low-carbon Development Demonstration Project, has achieved milestone progresses and realized preliminary industrial applications. The world's largest steelwork exhaust-to-ethanol pilot production facility constructed by Baosteel in cooperation with CAS and LanzaTech has achieved world-leading standards in indicators such as gas conversion rate and concentration of fermentation broth. The dream of turning exhaust gases of the iron and steel industry into raw materials of a new energy source will come true.

 (3) Baosteel has constantly explored new development paths of diversified industries. The diversified industries, actively increasing R&D inputs, have fostered the capability to enter new industries, driven industry transformation through innovation, engaged in extensive researches on cloud computing, high-grade wire rods, mineral wool from blast furnace slag and special bitumen and accelerated the exploration in new industries.

Technological Innovation Achievements