Puyang Iron and Steel Group achieved a profit of RMB 2.3 billion Yuan from last year to the first four months of this year
Puyang Iron and Steel Group (Puyang Group) is a major privately-held steel conglomerate covering from coal washing, coking, sintering, iron making, steel making, rolling, power generation, oxygen generation to scientific research. It is located in Wu’an city, Hebei province.
Generally speaking, steel manufacturers are facing downward pressure on profiting from sluggish demand. However, Puyang Group remained profitable: in 2014，the group achieved RMB 1.71 billion Yuan in net profit, 600 million in tax，2.3 billion in total；in the first four months of 2015, the group realized a total profit of 970 million Yuan, including RMB 530 million in net profit and RMB 440 million in tax. Thus, the profitability of Puyang Group ranked the 4th in the country and the 1st in Hebei province.
“How did Puyang Group realize a profit of 2.3 billion in the first four months of this year?” Guo Enyuan, Chairman of the Board, explained: “Poverty comes from poor planning”; “It’s common for a steel manufacture to waste billions of Yuan a year. Recycling is the reason why we can maintain strong growth.”
1. Getting higher returns by scientific management and cost reduction
Facing the recession, Puyang Group pursuit the minimum cost through the production cycle. Since 2014, Puyang Group comprehensively implemented the refined management and applied this scientific management to the whole manufacturing process.
Firstly, optimize production organization, production technology and human resources allocation. In order to make a scientific and reasonable objective to tap the full potential, Guo Enyuan, Director of the Board, visited the production sites of blast furnace and converter, measured the time of hot charging and the interval between material passing and perfected the production technology with technicians. Through all those efforts, realizable goals towards every procedure were finally settled. To “make money from saving”, a mutual beneficial system was formed, in which work team answered for workshop while workshop for branch, branch for the group. Leaders made their promise that whoever failed in achieving the target would be replaced by the capable. Last year, the steel branch overfilled its quota. Thus, the factory director got a lucrative performance pay. Combined with salary, his total income reached one million Yuan. Also, the income of employees was also rose by 20%. After changing the deputy manager and the team leader, the freight department lowered the traffic cost of steel from 18 Yuan per ton to 7.3 Yuan. Totally, 54 million Yuan was saved that year. Till the first four months of this year, the cost was lowered to 5 Yuan per ton—a drop of 75%.
Secondly, detail benchmarking framework and highlight key points. “Going out” to learn from other steel manufactures which were better than Puyang Group, while “bring in” key technical management personnel. Based on the changes in raw material market, Puyang Group further upgraded its sintering ore blending scheme and BF burden structure, reaching a thermal efficiency over 83%. The intensity of stamping coke was highly improved by refining coking process. The PCI replacement ratio and the BF oxygen enrichment ratio were improved steadily by making frequent small goals, which significantly reduced the ironmaking cost. To reduce ironmaking cost，Puyang Group emphasized on lowering the ferrous charges consumption while raising the pelletizing consumption. The production of plate products tended to be order-oriented. Thus, Puyang Group compelled all the orders to schedule production so as to reduce the consumption of transition material. Under the premise of meeting the need of clients, Puyang Group lowered the shear amount of plate to improve the rate of finished products which is 94.96% for heavy plate and 98.87% for HR steel sheet.
Thirdly, combine infomationization and industrialization and give full play to the Internet Plus. The group realized the computerization of the whole production process; put the ERP Management System and the energy resource management center into effect, and realized the integration and network management of production, supply and marketing. According to the standardized procedure, data from the whole process are coordinated by the system to “plug the loopholes” and the cooperating cost is settled within the day. By using information-based method to reorganize the producing process and optimize human resource allocation, Puyang Group downsized its personnel from 9300 to 7200, saved more than 90 million Yuan in labor cost.
Fourthly，gain benefits from human resources. The Group conducted corporate-sponsored development programs with Northeastern University to cultivate young technical personnel. As they became the main force in the main plant, personnel structure was further perfected. In addition, Puyang Group hired a lot of technical experts and sent them into every linkage of the whole production process, laying a solid technical foundation. By offering high salaries to experienced technical managers, Puyang Group held the leading position in both managing and technology. Due to the flat management mode the group applied，employees got their position through competition. The aim of attracting talents can be reached through proper pay, career potential and humane care while the unqualified can still be knocked out spontaneously.
Last year, Puyang Group has become the leading domestic steel manufacturer because of its low cost in production. The cost of iron casting ranked as the third in China, while the profits of each ton of material ranked the second. Compared with last year, the cost of iron casting dropped 418 Yuan per ton while 469 Yuan for crude steel casting, 300 to 500 Yuan for steel casting.
2. Build its brand with high quality of products; profit from the oversea markets.
Puyang Group holds the largest share of export in Hebei province, which pushes Puyang Group to pay extra attention to the quality of its product.
Firstly, continuously develop and research products and increase market share. In resent years, Puyang Group has kept increasing investment in products development, especially in high-grade steel which values high but in short supply. The Group established a R&D Center in cooperation with Academician Wang Guodong’s team from RAL of Northeastern University. The center also attracted many other experts in this field all over China. After 8 years’ unremitted efforts, the center has developed more than 30 special steel plates, including offshore platform steel, thick high-strength ship steel, high-strength bridge steel, low welding crack-sensitive high-strength steel, high grade pipeline steel, high-rise building steel and high-grade die steel. Those products are widely used in China’s major projects like offshore platform and ocean vessel and large quantities of high-quality products are exported to more than 20 countries and regions including Southeast Asia, Japan, Kora, Europe and America. “Puyang Plate” has already earned the trust of many overseas users. To cope with the over capacity of Hot-rolled coil and High-speed wire rod in domestic market, Puyang Group further perfected its products. A series of special-purpose steel were developed, including deep and extra-deep punching steel, high-strength and lightweight beam steel and wheel hub steel. Thus, Puyang got the opportunity to expend its overseas market. Now, 80% of Puyang’s products are special-purpose steel and the sales-output ratio is 100%.
Based on its high-quality products, Puyang Group has built its own brand. Puyang Group always strives for fine management and insists on the guideline of “customer upmost and quality first”. Puyang Group has a complete quality control system, and strictly adopts the standards above the national and industrial codes. Products of Puyang passed the quality inspection by CAQI. Also, the Group earned the reputation of the “Hebei famous product” and “Hebei famous brand”. 2014, two of Puyang’s products, Q345B steel plate and SPHC rolling plate, won the “Golden Cup” prize for metallurgical products. Standard on production and operation were based on 5 codes: quality, environmental-friendliness, occupational health and safety of the employees, exploitation of energy and scientific way of survey. Products of Puyang Group have passed quality inspection and won certificates from many world famous organizations and institutions, including the QASPB, A2-leveled and B-leveled Manufacture Permission of Pressure Pipe Unit, API Specification, LRQA and certificate of CCS, CCS, BV, NK, KR, ABS, GL, LR and DNV.
In 2014, the group exported plate 440 thousand tons and earned $230 million, ranking among the top in the province. In the first four months of 2015, plate maintained a strong export momentum and is expected to reach 1 million tons in the whole year. Because of high product quality and wide recognition from the customers, the price of steel plates from Puyang Steel was 200 Yuan higher than those from other companies per ton and in the first 4 months of this year, 130 Yuan higher per ton. The profit of steel per ton reached 340 Yuan in 2014, and 230 Yuan in the first 4 months of this year.
3 Keep the environment in mind and seek benefits in circular economy
Adhering to philosophy of “Circular economy and green steel development”, Puyang Steel has invested over 1.2 billion Yuan in technical reformation of energy conservation and environment protection which was 10% of the total investment. Environment protection equipment and the main equipment were designed, built and operated simultaneously. The Group also installed 92 sets of equipment for dust scrubber and 4 sets of sweetener. The cost for desulfurization is 10 Yuan per ton, while the number is 100 Yuan for other environment related cost. It was as much as more than 5% of the total cost. The group tried its best to deal with the pollutants within the enterprise with technology reformation and upgrading. It carried out many recycled engineering to use the gas, steam, solid waste, waste water, etc. to reduce the gas loss, to prevent the secondary pollution, to save water, and to protect environment. In 2014, Puyang generated 691 kilowatt of power by itself, supplying 70% of its total power consumption. Compared with other steel manufacturers in Hebei province, Puyang’s other indexes were also extraordinary: fresh water consumption per ton steel was 2.14 m3, furnace Coke ratio was 328kg/t and utilization coefficient of blast furnace above 1000 m3 level was over 3.0t/m3·d. Circular economy has been the new economic growth point and the power to sustainable development.
4 Seize every opportunity, perfect organization and profit from marketing
Just like other private funded ventures, Puyang Group has the advantages of fast and flexible decision-making mechanism, so it can always follow every change of the market and seize every opportunity.
Firstly, establish a market reaction mechanism, covering all processes including supplying, producing, marketing, transporting and utilizing. Based on daily price changes of both steel and material markets and the result of daily ERP cost accounting, the group adjusted its marketing strategy timely to seize golden purchasing opportunities. Last year，facing the downtrend in the price of powdered iron, Puyang Group lowered its inventories of powdered iron. With powdered iron only for 10 days, the Group could always purchase it at the lowest price. By this way, Puyang Group not only reduced the downside risk, but also benefited a lot. The production of Puyang Group is profit-oriented: the arrangement of production is based on the contract; the price of the products was based on the cost of producing. A high-speed wire road production line with an annual production of 800 thousand ton was shut down due to its poor profit.
Secondly, strengthen financial management and control administration cost to decrease financial expense. Under the premise of maintaining good relationship with financial institutions, the group downsized financial institutions from 26 to 9, repaid the bank loans of 2.4 billion Yuan, lowered the spot exchanging and bank acceptance bills, and managed the idle money to create incomes, thus the financial expenses were greatly reduced. In 2014, the total financial expense was only 7.4 million Yuan. Till the end of April, interest payment of bank loan was only 1.9 million Yuan while the income of deposit interest was 31.04 million Yuan and the total financial income reached 29.14 million Yuan. It was rare for steel manufacturers in Hebei Province, even in the whole nation, to see the income of deposit interest exceeding the expense of bank loan interest.
From: Hebei Economic Daily