Recently, reporters visited Hebei Iron and Steel Group, observing this company that has both international first-class production lines for high-end products and numerous production lines for ordinary products; it has a massive production capacity of 50 million tons but struggles with profit margins, exploring how it adapts and adjusts in adversity.
　　1. Control production capacity: "During the 12th Five-Year Plan, no additional production capacity will be added."
　　During interviews on the front lines of production and operations at Hebei Iron and Steel Group, the most frequently heard word was "profit." The head of the group's marketing department introduced that they publish a profit ranking every week, making the profitability of each subsidiary clear at a glance. The scheduling director of Handan Steel Company, Ren Zhigang, said that producing more does not necessarily mean earning more; production should be organized based on maximizing efficiency. The head of the sales company said that now when taking orders, the focus is not on quantity but on profit and efficiency.
　　Indeed, in the "micro-profit era," profit is king. At Hebei Iron and Steel Group, "micro-profit" has directly led to the traditional production organization principle of producing based on sales being gradually replaced by producing based on profit.
　　Not blindly pursuing output is a direct manifestation of producing based on profit. Currently, the market prices of most steel products hover around the cost line for a long time; selling products does not necessarily mean making money. On October 26 last year, Handan Steel, the main steel plant of Hebei Iron and Steel Group, took the initiative to carry out maintenance on a 3,200 cubic meter blast furnace that was supposed to be maintained at the end of December, two months in advance, which allowed for a daily reduction of 8,000 tons in production to cope with market fluctuations and falling steel prices, resuming production only at the end of the year. "It's not that there are no orders, but because there is no profit, we actively gave up some orders. Although all blast furnaces were in production in January, the production plan still decreased by 50,000 tons compared to the same period last year," Ren Zhigang introduced.
　　In fact, as early as three years ago, when Hebei Iron and Steel Group was established, the idea of prioritizing efficiency was already established. Chairman Wang Yifang recalled, "When the group was established, it was the largest steel enterprise in terms of production capacity in the country, but we never dared to call ourselves 'the boss' because most of our production capacity was low efficiency, the product grade was not high, and the efficiency was poor, so we could not be called 'the boss.'
　　"The group's decision-making level realized that we could no longer follow the old path of making money by expanding scale; otherwise, the more we produce, the more losses we incur, making money while losing, and working hard for nothing," Wang Yifang said. In 2011, Hebei Iron and Steel Group officially proposed that during the "12th Five-Year Plan," it would "not add a ton of production capacity."
　　In the workshop of the three-rolling mill at Shijiazhuang Steel Company, a worker told reporters that this used to be a production line for ordinary steel with an annual output of 940,000 tons, known as an "Asian demonstration factory." Even so, to cooperate with the adjustment of the company's product structure, the factory has completely switched to producing special steel. Although the output is not as high as before, the efficiency is significantly better than before.
　　"Analyzing the current profit winter, the main reason is the imbalance between supply and demand," Wang Yifang said. He believes that the serious structural overcapacity means that this situation will not fundamentally improve in the short term. "In addition to being prepared for a long period of tight living conditions, it is more important to learn differentiated competition and improve service levels in order to survive in the environment of overcapacity," Wang Yifang said.
　　2. Adjust structure: pursue specialized, high-quality, and differentiated competition.
　　Next to the three-rolling mill at Shijiazhuang Steel Company, a shiny steel production line is under intense testing. "In the future, we can produce dozens of different specifications of shiny steel here, and after surface polishing treatment, the price can increase by more than 1,000 yuan per ton," said Song Yibing, deputy manager of the special steel sales company of Hebei Iron and Steel Group.
　　In fact, since the establishment of the group more than three years ago, it has been committed to adjusting the product structure. At the beginning of its establishment, "ordinary goods" accounted for a significant portion of Hebei Iron and Steel Group's products, and the steel subsidiaries under the group were forced into a micro-profit pattern. After continuous adjustments, Hebei Iron and Steel Group has successively filled more than 10 domestic gaps in products, cumulatively developing 469 new products such as X100 pipeline steel and HBW1000 non-oriented electrical steel, with the proportion of high value-added varieties exceeding 60%, among which high value-added automotive sheets are exported in bulk to the European market. Just the six product development projects recently accepted by the Hebei Iron and Steel Technology Research Institute have already produced more than 40,000 tons of specialty steel, bringing an economic benefit of 4.75 million yuan to the group.
　　Ren Zhigang told reporters that in 2011 alone, the output of new products at Handan Steel reached 2.45 million tons, a year-on-year increase of 33.9%, creating an economic benefit of 137 million yuan.
　　"For a long time, the industry did not have a clear understanding of transformation and upgrading, but the development experience of recent years tells us that in addition to promoting energy conservation and environmental protection, we must also adjust the product structure and upgrade product quality, and the results of transformation and upgrading must ultimately be reflected in the enterprise's efficiency," said Wang Jicheng, a researcher at the State Council Development Research Center.
　　"In the face of a new round of market winter, the intensity of product structure adjustment can only be strengthened, not weakened," Wang Yifang stated. He introduced that currently, "ordinary goods" still occupy a considerable proportion in the group's product structure, and the pace of increasing product added value and promoting product structure upgrading cannot stop; high-end steel also faces overcapacity, and homogeneous competition is becoming increasingly fierce, so it is necessary to accelerate the pace of developing new varieties and improving product quality to achieve differentiated competition.
　　The company has newly established the Hebei Iron and Steel Technology Research Institute to provide technical support for product structure adjustment, which is its main task.
　　"Product structure adjustment should be forward-looking," said Zhang Xiaoli, president of the Hebei Iron and Steel Research Institute. He believes that some products currently have low market demand and low profits, but have huge market potential, and such varieties should be developed; some products may not see significant profit increases in the short term, but have needs from advantageous customers, and to maintain long-term stable strategic partnerships, such products should also be developed. "Currently, new products contribute 13% to sales, and high-end steel accounts for 63%. Only by pursuing specialized, high-quality, and differentiated competition can we gain competitiveness," Wang Yifang said.
　　3. Improve management: management is a book that enterprises must always read.
　　Walking through the production workshop of Hebei Iron and Steel Group, reporters often feel the strong impact of the deteriorating market situation on production management.
　　"The quality disputes raised by downstream customers have significantly increased; even small scratches that do not affect product performance must be treated as quality dispute products and returned," said Jia Lijun, the rolling mill class leader at the three-rolling mill.
　　"Originally, the rolling plan was arranged in thousands of tons or hundreds of tons; now, with the subdivision of varieties, orders are in tens of tons or twenty tons. In the past, an order often took ten days to complete without changing specifications or steel types; now, we change dozens of steel types in a day. Just yesterday, we changed more than 50 steel types and completed more than 30 orders." said Qin Shengping, the section chief of the three-rolling mill.
　　As early as when responding to the impact of the 2008 international financial crisis, Hebei Iron and Steel Group proposed: "In the battle against the crisis, what matters is internal strength and management." Over the past three years, the refined management of "focusing on details, depth, and implementation" has been continuously promoted in Hebei Iron and Steel. Some indicators that could not be achieved in the past and specifications that could not be produced have made significant breakthroughs due to effective management. The steelmaking plant of Handan Steel saved 245 seconds of process time per furnace of steel through lean production. Employees in the precision manufacturing class of the Chenggang bar line factory have accurately measured the various sizes of the assembly roller box to within 0.02 millimeters, which is only equivalent to 1/3 of a human hair, but this has resulted in nearly one million yuan in reduced roller box burning losses this year.
　　Today, the shadow of losses once again looms over the industry, and Hebei Iron and Steel Group's cost reduction and efficiency enhancement efforts continue to advance. At Handan Steel, without affecting product quality, workers have increased the use of domestic iron concentrate to stabilize the rising costs of high-priced imported ore, reducing the iron front cost by 100 yuan per ton; at Tangshan Steel, the recovery of iron-containing waste materials has been continuously strengthened, saving 59 million yuan in procurement expenses last year; at Xuan Steel, through the "secondary market pressure" mechanism, the logistics cost per ton of steel has been reduced by another 70 yuan.
　　In fact, resisting losses, the management is a fundamental principle that enterprises must always adhere to! How much benefit can management bring? Zhang Yingqiu, the head of the finance department of Hebei Iron and Steel, calculated an account: since the establishment of the group three years ago, they have cumulatively digested 27.3 billion yuan of increased expenditure and reduced profit factors through refined management, with a reduction in costs of 19.8 billion yuan!
　　4. Extend the industrial chain: World-class steel companies do not solely rely on the steel industry.
　　If the profits from the steel main business are not good, efforts should be made to strengthen the steel main business while seeking new profit growth points from non-steel industries. Today, Hebei Iron and Steel Group's non-steel industry has already taken shape: second in national bulldozer sales, second in national iron concentrate production, controlling 5 billion tons of iron ore resources, and participating in the construction of Huanghua Port with an annual throughput of 50 million tons of ore berths and 20 million tons of general bulk berths.
　　Wang Yifang said: "World-class steel companies do not solely rely on the steel industry." He often mentions an example, the German steel giant ThyssenKrupp, which produces elevators and has now developed into one of the world's top three elevator and escalator manufacturers.
　　The large-scale production model gives the steel industry an inherent advantage in developing the entire industrial chain. Wang Yifang introduced that roughly estimating, producing one ton of steel requires 1.7 tons of iron concentrate, consumes 500 kilowatt-hours of electricity, and needs more than 4 tons of logistics support for inbound and outbound. Based on a production capacity of 50 million tons, any link in the production scale is enormous, enough to form a scale advantage.
　　"Today, the steel main business is facing difficulties, and the non-steel industries in the industrial chain should take the lead." Wang Yifang said. According to Hebei Iron and Steel Group's strategy of "focusing on steel and moderately diversifying," by the end of the 12th Five-Year Plan, it will create five major industrial sectors: steel, logistics, resources, finance, and machinery manufacturing, forming an industrial pattern of one main industry and multiple collaborations, with non-steel industry sector revenue reaching 140 billion yuan, establishing a "domestically leading, internationally first-class" steel enterprise.
　　Focusing on steel to expand upwards, extend downwards, and explore outward, cultivating new profit growth points is not only a need for enterprises to seek profits but also a guarantee for the healthy development of the steel main business. "By the end of the 12th Five-Year Plan, we will have a production capacity of 35 million tons of iron concentrate, with a self-produced ore ratio reaching 40%, actively occupying overseas iron ore resources, and the equity ore ratio reaching 20%. By then, the dependence on imported foreign ore will be further reduced," Wang Yifang said.