Tuesday, March 6, 2012

Steel Pig Farmers

One of the world's leading steelmakers, Wuhan Steel Group, recently announced plans to build a 10,000-head pig farm as part of a strategy of company diversification.

A common saying in the company lately is, "Making steel is not as good as selling pork.” Energy and raw materials are rising and steel prices are down. Last year Chinese steel companies made a profit of 2.5%, far below the average of 6.5% for industrial enterprises. 

Steel is cheaper than pork. The price of steel is said to average 4.7 yuan per kg, far less than the 26 yuan price of pork.

The company's chairman, Deng Qilin, says the decision to build a pig farm is not done on a whim. It is part of a broader restructuring plan to diversify the company away from its focus on steel. Deng says the cost of steel production is going up while the demand for downstream products like cars is down. The company makes a profit of about 2 billion yuan annually producing 300-400-million tons of steel. Deng says the days of relying on massive scale and waste of resources is over.

The company plans to set up a modern household service company that will provide all sorts of services, from buying houses to renting cars to children's education to changing light bulbs. They also have plans for real estate and other manufacturing. Last month they signed a joint venture agreement with Hong Kong's China Resources Group to produce natural gas. 

Deng says Wuhan Steel's next step is to buy several thousand mu of land to begin "ecological" production of chickens, hogs, and vegetables. They plan to sell "Wuhan Steel" brand vegetables.

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