A worker stacks train carriage wheels at a plant in Maanshan, Anhui province. The government is investing 800 billion yuan ($121 billion) to build 6,000 kilometers of high-speed rail track by 2012. [Photo / Bloomberg]
Government testing under way for high-speed train wheel productsSHANGHAI - Magang (Group) Holding Co Ltd, China's biggest maker of train wheels, said the Chinese government is testing its high-speed train wheel products, which may replace imports as the nation embarks on an extensive program of railway construction.
The tests are being conducted for trains that can run at 250 kilometers an hour, and for high-power locomotive wheels, Magang Chairman Gu Jianguo said in an interview while attending the annual session of the 11th National People's Congress in Beijing. China imports its high-speed wheels from Europe and other places, he said.
China, the world's biggest steel producer, is encouraging its mills to make high-grade alloy as overcapacity and the high cost of raw materials mean the industry has the lowest profit margins in the nation. The government is investing 800 billion yuan ($121 billion) to build 6,000 kilometers of high-speed rail track by 2012 to help carry its industrial expansion inland.
"Wheels for high-speed trains, high-strength automotive sheets and high-strength reinforcing bars are among our development targets," Gu said. The "profit margin of train wheels is high so far. Still, it may be squeezed by rising competition as several rivals are also studying how to develop train wheels".
Magang, China's 10th-biggest mill, aims to boost capacity by as much as 56 percent to 25 million tons by 2015, by acquiring domestic rivals, Gu said.
The average profit margin of China's large and mid-sized steelmakers was 2.91 percent last year, compared with 6 percent for all industries, Xinhua News Agency reported on March 2. Magang, based in Anhui province, has a similar profit margin to its rivals, Gu said.
The company is planning to expand into steel cutting and equipment manufacturing in the next five years, the chairman said. So-called "non-core" business accounts for 10 percent of Magang's sales, and the company wants to expand that to 15 percent, he said.
The Chinese steelmaker, which imports 75 percent of its iron ore requirements, has abandoned talks for several mine projects because they are "too expensive", Gu said, without giving details.
The price of 62 percent iron ore arriving at China's Tianjin port reached $190.60 last month, the highest level since November 2008, according to data compiled by Bloomberg.
Chinese steelmakers will probably build more electric arc furnaces, which use scrap as an alternative to iron ore in steel production, Gu said. Magang will start a new 1-million-ton electric arc furnace this year, he said.
"We believe that the supply-demand status for iron ore will experience a turnaround in three to five years," he said, "We want to boost control of the raw material, but we also care about the cost performance of investments."
The steelmaker needs to import 1 million tons of coking coal from BHP Billiton Ltd and other suppliers annually, he said. Magang is buying iron ore and coal under quarterly contracts, he said.
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