[Belt&Road]Baogang Group in India

February 5, 2017, the 9th day of the first month of China’s lunar calendar, was the first day off for employees of most Chinese companies after the week following the Spring Festival holiday. But Liu Xin was still on duty. He is a steel rolling worker at the rail beam factory of China’s Baotou Iron & Steel (Group) Co., Ltd. (“Baogang Group” for short). He manages the No. 2 Universal Steel Rolling Line via several computers in a small control room of about 20 square meters.

This production line was built in 2006 with CCS universal stand and related technology, both provided by SMS Group. The 100-meter heavy rails produced there represent the flagship product of the heavy industry hub in northern China. Although China’s steel market has experienced a significant decline in recent years, this production line has orders booked through April.

At the 50th Annual Conference of the World Steel Association in October 2016, data provided by Baogang Group caught the attention of participants from India’s Jindal Group: the maximum speed for Beijing-Shanghai bullet trains in experiments reached as high as 486.1 kilometers per hour; the trial run of Electric Multiple Units (China’s standard EMU) between Zhengzhou in Henan Province and Xuzhou in Jiangsu Province reached over 420 kilometers per hour when two trains meet, the equivalent of 117 meters a second; the Datong-Qinhuangdao Railway, China’s most important route for coal transportation, and the Shanxi-Henan-Shandong Railway were built with 75N Bainitic Steel from Baogang Group. As its newest product, the alloy features high tenacity and abrasive resistance.

China is now home to the world’s longest high-speed railway network, with tracks stretching over 20,000 kilometers. About half of the rail tracks were produced by Baogang Group, whose quality is considered top globally. Jindal Group ended up contacting Baogang Group with the help of the World Steel Association, and they reached an agreement in which Baogang Group would subcontract technology and services to a company affiliated to Jindal Group.

Jindal Group’s problem was the lack of the technology adopted in the universal steel rolling production line that Liu Xin operated. Jindal Steel & Power Ltd., a subsidiary of Jindal Group, produces rails with equipment similar to Baogang Group’s. However, due to a lack of new technology, its output and quality of rails didn’t reach design capacity, and even its German partner couldn’t bring the product up to par. They hoped to acquire the necessary expertise and instruction from Baogang Group directly.

Baogang Group was established during China’s campaign to mass-produce steel during the mid-20th century. Its No. 1 blast furnace was dedicated by late Premier Zhou Enlai. As one of the three earliest major steel producers established after the founding of the People’s Republic of China in 1949, Baogang Group has gained plenty of experience and developed considerable technological innovations during its long history. Exporting technology and soft power are concepts to which the group has attached great importance in recent years as it has been committed to industrial upgrade and innovation.

The two steel producers have become perfect partners. The rail beam factory of Baogang Group sent 57-year-old Jing Yinong, deputy director of its technology center, to cooperate with the Indian company. Jing graduated from Baotou University of Iron and Steel Technology (present-day Inner Mongolia University of Science and Technology) with a degree in steel rolling in 1983. He is an experienced expert in this field. Since November of last year, Jing and his team have visited India four times. In Raigarh, Bihar State, Jing helped Jindal correct rail passes and redesign their heater, which raised their monthly output capacity to as high as 50,000 tons. Their technology service will conclude in April.

People from both producers have grown to know a lot more about each other during the exchanges. Personnel from Jindal Group were amazed by Baogang’s spotless factory and advanced environmental protection systems, and Jing highly praised Jindal for its efficiency in building two 4,500-cubic-meter blast furnaces within only one year, as well as its good sense of environmental protection.

Amid the changes in the global economy, China unveiled the Belt and Road Initiative, which has reached the phase of cooperative implementation. From the perspective of many insiders, the unprecedented technology cooperation between Baogang Group and Jindal Group will accumulate specific experience for the implementation of the Belt and Road Initiative that aims to foster international cooperation.

Products from Baogang Group have gained a sterling reputation in India, which was another major reason why Jindal chose to cooperate with Baogang Group. Baogang Group began exporting to India in 2010. At first, the majority of its exports were lowlevel products such as steel round bars, steel billets, and ordinary seamless steel pipes. High-level products have gradually taken a larger proportion, especially since last year. In early 2017, Baogang Group exported nearly 20,000 tons of medium steel plates, a sophisticated product to be used in oil pipeline projects around New Delhi, to India for the first time.

The World Steel Association held its Asian market conference in Mumbai last November. The report from the conference analyzed “whether India will propel global economy growth.” The sluggish world economy has caused development of the global steel market to slump, and many now believe that India is the best place to look for growth. Although this report mentioned in particular that “growth in various areas of India differs greatly” and investment’s proportion of India’s GDP is shrinking, it still maintained that India’s economy and steel market had a good momentum.

Even though it is located inland, Baogang Group exports 10 to 15 percent of its total output. Its export volume ranks among the top ten of China’s inland steel producers. Liu Yufeng, general manager of the International Trade Company of Baogang Group, oversees the group’s overseas marketing. Like Jing Yinong, he has worked in the steel industry for over three decades. Liu agreed emphatically with the assessment that although India’s steel consumption in recent years has measured only a tenth of China’s, the South Asian country has great potential. Even as India is seeing high-speed growth, its per capita consumption of steel remains relatively low, and the Indian government is enacting many ambitious reforms. Analysis of the fluid market environment inspired Baogang Group to focus on the Indian market even though most of its current overseas customers are from Europe, the United States and Southeast Asia.

“India’s development is in a different but complementary phase compared to China,” explains Liu. “China has begun to enter the ‘Industry 4.0’ era and is seeing extensive urbanization, while India’s industrialization has just started to gain steam. As China’s steel industry is tightening its belt, India is seeing rapidly increasing demand.” India surpassed the United States to become the world’s third largest steel producer in 2015. It also sees fierce domestic competition. Compared to Indian companies, Baogang Group offers a wide range of products and the precious rare earth elements in the steel are its biggest advantage in the market. Baogang Group is headquartered in the center of the Inner Mongolia Autonomous Region, which has the world’s largest rare earth reserves. Steel containing rare earth is noted for its greater tenacity and plasticity. Over 75 percent of the heavy rail tracks on the Qinghai-Tibet Railway were produced by Baogang Group.

Logistics can bottleneck inland companies’ exporting power, and even Baogang has not been immune to this. Its products are usually shipped from the port of Tianjin. Typically, shipments take 35 days to reach Dubai, a period in which the market could shift drastically. Liu Yufeng has great expectations for the infrastructure network being promoted by the Belt and Road Initiative, which will connect Asia, Europe and Africa. “If our exports to Central Asia and South Asia could be transported through Inner Mongolia to Kashgar in Xinjiang Uygur Autonomous Region and then to Gwadar port in Pakistan, it would cut our traditional route by half,” says Liu. “This would not only avert considerable market risk, but also facilitate exports of many more types of products over land versus sea.