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CITIC Pacific Special Steel

CITIC Pacific Special Steel is the largest dedicated manufacturer of special steel in China. With a total production capacity of 12 million tonnes per annum, the company operates three plants — Jiangyin Xingcheng Special Steel, Hubei Xin Yegang and Qingdao Special Steel, which was newly acquired in 2017. The company produces bars, plates, seamless steel tubes, wires, forging steel and casting billets for customers primarily in the auto components, energy, machinery manufacturing, oil and petrochemicals, transportation, shipbuilding and other industrial sectors.

Year in review

In 2017, the Chinese government pushed forward with supply side reforms to rein in excess production capacity. This, together with stable macroeconomic development and improving business sentiment, encouraged the healthy development of the steel industry. During the year, CITIC Pacific Special Steel achieved sales of 9.81 million tonnes (including attributable sales of 1.68 million tonnes from its newly acquired plant Qingdao Special Steel), up 25% over last year, and recorded revenue of HK$62.38 billion, representing a 77% rise year-on-year.

Over the year, CITIC Pacific Special Steel continued to optimise its product mix with increased focus on highermargin product sales. At the same time, to manage against fluctuating raw material prices, the company maintained disciplined procurement controls and kept its overall raw material costs below market levels. As a result, net profit increased by 9% to reach HK$2.13 billion.

A major development in 2017 was the 100% acquisition of Qingdao Special Steel, a manufacturer of wire, bars and flat steel with a three-million-tonne annual production capacity. This plant is located in Shandong Province, an important market for automotive steel. Situated next to Qingdao Dongjiakou Port, one of the busiest and largest hubs in Northern China, Qingdao Special Steel enjoys significant logistical advantages. This acquisition has strengthened CITIC Pacific Special Steel’s leading position in the industry, diversified its product mix, and increased production capacity and market share.

Following the acquisition, CITIC Pacific Special Steel has further centralised sales and production capacity planning among its three business units. Jiangyin Xingcheng Special Steel, Hubei Xin Yegang and Qingdao Special Steel now jointly conduct new business development and customer relationship management activities.

During the year, more than half of all products manufactured by CITIC Pacific Special Steel were sold to the auto components and machinery manufacturing sectors, representing a similar contribution as last year. The company also developed and launched new products, which comprised 13.9% of total sales in 2017, equivalent to 1.36 million tonnes, up 16.2% over the previous year.

Domestic sales remained strong, with over 80% of total products sold in China. Export sales, however, were hindered by the enforcement of antidumping measures against Chinese steel in some overseas markets.

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