March 9, 2007 / 10:09 AM / in 12 years

China's Shougang Steel to slash jobs as plant moves

By Lucy Hornby

BEIJING, March 9 (Reuters) - Beijing steel maker Shougang Iron and Steel Group will cut its workforce to about 20,000 as it moves to a new coastal facility and closes its polluting plants in China’s capital, its chairman said on Friday.

The cut of 64,700 jobs comes on top of a reduction to around 83,000 employees at the end of last year from 174,000 employees in 2001 and illustrates the labour challenges faced by China as it restructures its state behemoths.

China’s state-owned enterprises promised workers lifetime employment plus schools and healthcare.

But since reforms gathered steam in the early 1990s, China has been gradually stripping away the social services and guaranteed jobs in order to streamline its firms into globally competitive enterprises.

"It’s a problem we must solve for the sake of social stability and to meet our responsibilities, so that everyone can be taken care of and get a job," Shougang Chairman Zhu Jimin said at a news conference.

"If even one worker is not taken care of, our cadres can’t leave their posts."

Shougang is closing its Beijing plants and building a new mill with an annual capacity of 9.7 million tonnes on the Hebei coast in order to modernise and help reduce Beijing’s choking pollution.

It will hold 51 percent of the new Caofeidian project and Tangshang Iron and Steel Group, China’s second-largest steelmaker, the remainder.

Shougang produced 12.48 million tonnes of steel in 2006, earning it revenue of 87.47 billion yuan ($11.30 billion). But profits halved, falling by 1.71 billion yuan to 1.65 billion, due to weaker steel prices and higher raw material costs.

Hebei province will close 7.3 million tonnes of steel capacity to offset Shougang’s new capacity, with its production starting by 2010, Zhu said.

China’s planners are pushing outdated mills to close and medium-sized firms to merge to create globally competitive enterprises.

By the time its Beijing operations are phased out in 2010, 10,900 workers will have retired, Zhu said. Another 13,000 will be forced into early retirement.

About 20,000 will move to Caofeidian for non-core businesses, while 21,200 will be given a termination payment and be retrained for new jobs. One-third had already completed the training, he said.

Shougang is looking for overseas investment projects, Zhu said, without elaborating. The company owns an iron ore mine in Peru that has been plagued by labour disputes.

Zhu would not comment on the company’s plan to fully list its assets once the move out of Beijing is completed, or on what its intentions were for its four listed Hong Kong units. ($1=7.743 Yuan)

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