Baowu Group, China’s leading steelmaker, is considering relocating some of its blast furnaces to Cambodia this year, plans that local officials have hailed as a strong indication of a booming construction sector in the Kingdom.
According to Reuters, a Baowu senior manager, who asked not to be named, revealed this week that the company is studying plans to relocate blast furnaces from Xinjiang, in China’s far northwest, to Cambodia. Reuters described the plans as a bold example of China’s heavy industry shifting excess capacity overseas.
The move, which would mark Baowu’s first overseas production, shows the lengths Chinese steelmakers are prepared to go to maintain output levels despite Beijing’s drive to cut industrial slack in the mainland, Reuters 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 in late 2019, the Baowu source told Reuters.
Seang Thay, spokesman for the Ministry of Commerce, who was not aware of the news, said the Chinese company’s plans reflect the success of Cambodia’s booming construction sector in the last few years.
“We have a very open investment environment compared to others in the region. The relocation of the company is yet another sign that our construction sector is booming,” he said, adding that Cambodia already has many cement factories and even a few steel plants built by Chinese investors.
Cambodia mainly imports its steel from China, Vietnam, Thailand, and Italy.
China has shut more than 150 million tonnes of steel capacity in the past three years as part of a campaign to modernise its economy, but still accounts for half of global output, with a capacity of 980 million tonnes a year, Reuter reported.
The equipment to be moved would come from Xinjiang Bayi Nanjiang Steel Baicheng Co Ltd, a Baowu subsidiary based in Aksu in far northwest China. The plant was shut in 2017 and sits some 4,000 kilometres from Phnom Penh.
“This equipment may be seen as outdated in China, but it is still quite advanced in Cambodia,” the manager said.
In June last year, the Cambodian government approved a project to build a $31-million steel plant in Kampong Speu province. A month later, Hoa Phat, a Vietnamese steelmaker, announced plans to build a $500-million factory in Preah Sihanouk that will be able to generate 2 million tonnes of steel a year.