Chinese state-owned iron and steel company China Baowu Steel Group Corp Ltd has unveiled plans to relocate its blast furnaces from Xinjiang Autonomous Region in the northwest of China to Cambodia, which will be the first overseas Baowu production plant, a Reuters report on Wednesday said.
The plan was welcomed by Cambodian officials and private sector representatives, who expressed hope that local steel production will help satisfy the growing demand for steel in the Kingdom as the construction sector continues to boom and materials flood in through imports.
Quoting a senior Baowu manager involved in the plan, the Reuters report said Baowu is looking at the feasibility of shipping two blast furnaces, with a combined capacity of 3.1 million tonnes, along with two converters to turn iron into steel, to Cambodia late this year.
The equipment to be moved would come from Xinjiang Bayi Nanjiang Steel Baicheng Co Ltd, a Baowu subsidiary based in Aksu city in far northwest China. The plant was shut down in 2017.
“The equipment may be seen as outdated in China, but it is still quite advanced in Cambodia,” Reuters quoted the manager as saying. The manager declined to be named as he is not allowed to talk to the media.
The Kingdom’s construction sector has been growing rapidly, raising the demand for steel. During the first seven months of last year, Cambodia became the largest importer of Vietnamese steel, taking in nearly 40 per cent of what the country has exported over the past seven months, according to data from Vietnam’s customs authority.
During the period, Cambodia imported 717,572 tonnes of steel from Vietnam, a 49 per cent increase compared to the first seven months of 2017. The amount was worth $462.73 million, a 77.9 per cent jump.
Cambodian Ministry of Commerce spokesman Seang Thay on Thursday said having steel production in Cambodia is what the Kingdom has been looking for. He said while the demand for construction materials is increasing, only cement has the majority of its demand supplied locally. Other materials are imported.
“The steel production, if the firm really relocates here, will be very beneficial for us because we need it for the construction boom,” he said.
Cambodia Chamber of Commerce vice-president Lim Heng said on Thursday that Chinese investment is driving the Kingdom’s construction boom and it is a good advantage for investors from that country to set up a steel plant in Cambodia.
“I think more than 90 per cent of steel demand in the Cambodia construction sector is imported. If the project materialises it will supply steel to the local market and help to lower the Cambodian trade deficit,” he said.
However, Wood Mackenzie analyst in Beijing, Ming He, told Reuters that establishing a steel industry in Cambodia – either by shipping it in or building it from scratch – will present challenges.
“It would be very difficult to set up steel mills in Cambodia, given its lack of infrastructures like railways and utilities, and a noncommittal investment environment,” Ming He was quoted as saying.