Manufacturing

CITIC Pacific Special Steel (“Special Steel”) is the largest dedicated manufacturer of special steel in China, with a production capacity of 9 million tonnes per annum. It operates two plants — Jiangyin Xingcheng Special Steel and Hubei Xin Yegang — for producing bars, plates, seamless steel tubes, wires, forging steel and casting billets. Its customers are primarily in the auto components, energy, machinery manufacturing, oil and petrochemicals, transportation, shipbuilding and other industrial sectors.

Year in review

Global demand for steel remained weak in 2016. Despite government efforts to step up supply side reform, the Chinese steel market suffered from overcapacity, resulting in a chronically challenging business environment for Chinese steelmakers. Against these headwinds, total sales were up 12% over last year with an end-of-year volume of 7.82 million tonnes. Nevertheless, a lower average selling price left revenue flat at approximately HK$35.2 billion.

In 2016, Special Steel continued to refine its procurement strategy and maintained overall raw material costs below market levels, despite rising commodities prices throughout the year. This, coupled with increased sales in higher-margin product categories, enabled the company to end the year with a net profit increase of over 20%, excluding the impairment recorded last year.

More than half of all products manufactured by CITIC Pacific Special Steel in 2016 were sold to the auto components and machinery manufacturing sectors, similar to their contribution last year. Bar steel, plates and seamless steel tubes — the major products of the company contributed over three quarters of total sales volume. The company’s distribution of sales remained consistent with last year, with over 80% of its products sold in China. Despite the enforcement of international anti- dumping measures against Chinese steel, the company also achieved a total growth in export sales of 8.9%.

With the establishment of a centralised sales office in 2016, Special Steel achieved further gains integrating domestic sales and production capacity planning. The company also continued to invest in optimising its product mix, including increased production of higher quality bar steel products. What’s more, it also developed 1.17 million tonnes of new products, which comprised 15% of total production in 2016, up 6.4% over last year.

Key Customers