Hidden Gems: Wugang

Name: Wuhan Iron and Steel Group (Wugang)
Listed: Since 1999 on Shanghai Stock Exchange
Chairman of the board: Deng Qilin
Employees: 90,000
Revenue (2006): US$ 5.7 billion

If manufacturing steel was a race, Hubei's Wuhan Iron and Steel (better known as Wugang) would not be the quick rabbit. It would be the reliable and steady turtle. When most steel companies modernised their factories in order to speed up production, Wugang focused on improving the quality of their products. The company also invested considerable amounts into specific steel sorts, which are used in the high-technology machinery industry. Within more than eight years, the whole mill was transformed from an old "Communist style" steel mill into a completely modernised factory with high quality products. But quality takes time. Wugang's steel ingots are solely produced from scrap metal which is a difficult raw material to use as many impurities have to be removed. Here lies the key to Wugang's quality. A slow cooling process helps reducing the impurities and makes them easier to remove. Only high quality steel plates pass this procedure, and Wugang is one of the few steel mills that offer this pre-treatment.

The company currently has an annual capacity of 13 million tonnes of crude steel and - as the only steel manufacturer in China �a secondary focus on silicon steel with an annual capacity of 270,000 tonnes. But Wugang does not seem to rest on its achievements. The company has received approval from China's National Development and Reform Commission to expand its crude steel capacity to 18 million tonnes per annum by 2010. Wugang is also in the process of acquiring a 51% stake in Liuzhou Iron and Steel Group, one of the industry leaders in Guangxi province. The fact that the central government is trying to prevent China's crude steel production from expanding means that some local production capacity will have to be shutdown for the deal to be approved. That will give Wugang the advantage of being able to control the provincial steel supply. Another deal already done was the purchase of a 48.41% stake in Kunming Iron and Steel Group. This merger allowed Wugang to become China's third largest steel company behind Baosteel and Tangshan Iron and Steel Group. China isn't Wugang's main focus of growth, however. In 2006, China's Ministry of Commerce gave approval for the company to set up Wholly Foreign-Owned enterprises (WFOE) in Germany and Japan. The purpose of these overseas enterprises is to take care of marketing, technology transfer and Wugang's project contracting business. One of the new WFOEs, Wuhan (Europe) Trade Company Limited was incorporated in Germany and distributes Wugang's products in Germany and across Europe. Wugang also set up an office in the US at the end of 2007.

With an innovative production process and an aggressive acquisition plan, Wugang has become a main player in China's competitive steel market.

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