In the Hurun Rich List 2008, which was released on October 7 in Shanghai, the second place was taken by Du Shuanghua, Chairman of Rizhao Steel. He had the fortune of 35 billion Yuan (USD 5 billion). Liao Haiting, Party Secretary of Rizhao Steel, said that he already was afraid of this.
In the Hurun Rich List 2007, Du Shuanghua was ranked 14, with the fortune of 8 billion Yuan (USD 1.14 billion). In the Forbes Rich List 2007, Du was ranked 185 with the fortune of 1.5 billion Yuan (USD 214.3 million). This year he took the second place, what could be called “huge progress”.
Liao Haiting already suspected Du’s progress, because before the issuance of the list, he got related news. He sent someone to Shanghai, in order to persuade Hu Run not to rank Du Shanghua into the Top Ten of the list. However, Hu Run rejected and still ranked Du as No. 2. Yet it was said that Hu used to plan to put Du in the No.1 place.
Du Shuanghua seemed to be a “mysterious” black horse in the fortune list. Compared to the richest Chinese Huang Guangyu, he was very low key. The Secretary Office of Rizhao Steel expressed that it was unthinkable that their chairman would agree with an interview from the media.
The No.2 from Conservative Calculation
Hu Run said on October 6 that Rizhao Steel was not a listed company. “The calculation of Du Shuanghua’s fortune depended on the way of listed steel companies in combination with the characteristics of the steel industry,” said Hu. According to the relevant data, the profit of Rizhao Steel in 2007 was 5.8 billion Yuan (USD 828.6 million). This year’s profit was estimated on 8 billion Yuan (USD 1.14 billion). Based on a 4 or 6 times ration, it could be calculated that Du’s fortune was about 35 billion Yuan (USD 5 billion).
According to Hu Run, he has considered the status quo of the Chinese steel industry. Otherwise, Du’s fortune should have been calculated on the ratio of 6 or 8 times. Hu Run said that he considered many people for the first couple of places of the list. Du’s place was the result of careful consideration.
Like many other rich men listed in the Hurun Rich List 2008, Liao Haiting was not satisfied with the fact that Du Shuanghua was ranked in such a high place. He said: “We don’t want to gain fame. We just don’t agree with Hu Run’s way of calculation.”
This already was the second time that Du Shuanghua and his Rizhao Steel gained public attention in 2008. After the May 12 Wenchuan Earthquake, Rizhao Steel, which was a private company, denoted an accumulation of 152.53 million Yuan (USD 21.9 million). That was the first time Rizhao Steel got public attention this year.
After becoming the private enterprise which made the largest denotation in China, Du Shuanghua never spoke to the public about this case. He did not show up even though he was ranked No. 2 in the Hurun Rich List 2008. Actually, in the live of denotation ceremony held by CCTV, Du sent a vice president of his company to give out a check of 100 million Yuan (USD 14.3 million).
“We are studying this ‘emergent case’,” said Liao Haiting. “At the moment it is not convenient for us to give out comment.” Though Du was a low key person, one copy of inside material can show his wealth track.
Advantages of Lower Cost
The 43-year-old Du Shuanghua has been dedicated to the steel industry since 1987. At the start the annual output value was less than 2 million Yuan (USD 285.7 thousand). In 2003, it became the leading enterprise of welded pipe in Shandong Province with the annual output value of 8 billion Yuan (USD 1.14 billion). It also developed from a small-sized workshop with fewer than 100 employees to a group company with more than 8000 employees. In 2003, Du’s welded-pipe company made a profit tax of 2.38 billion Yuan (USD 340 million) and a profit of 1.035 billion Yuan (USD 147.9 million).
Yet with the enlargement in the enterprise’s scale, the raw material supply of the welded pipe became the bottleneck which restrained its development. After doing research in Tangshan, Dalian, Qinhuangdao and some other places, Du decided to locate his plant in Rizhao City, Shandong Province.
Liao Haiting, who helped Du a lot in his enterprise’s settlement in Rizhao, became the Party Secretary of Rizhao Steel. Du also attached great importance to Liao Haiting. The establishment of Rizhao Steel was another career peak for Du Shuanghua.
Du said in the above-mentioned inside material: “Looking back at the process of choosing a location for our enterprise, I think it was right and wise. This decision has given us huge benefits in the transportation costs. It also matches with the policy that the large-sized steel enterprises should be distributed in the coastal areas.”
Previously, Liao Haiting explained the explosive development of Rizhao Steel like following: the cost of the ore as the raw material from Rizhao Port to Rizhao Steel is only 2.4 Yuan/ton (USD 0.34 cents), while it will cost over 100 Yuan (USD 14.3) to the Shandong inland; the cost of transporting the finished goods to the port is twice the cost of the raw materials. Every year Rizhao Steel needs more than 10 million tonnages of ore. The location of the plant saves 2 billion Yuan (USD 285.7 million) in the costs every year, compared with the steel enterprises located in the Chinese inland. Meanwhile, Rizhao is in the middle field of the road and ship transportation in China. The transportation of Rizhao Steel’s products to Shanghai by ship only costs 70 Yuan (USD 10) per ton, while through road transportation it will cost 200 Yuan (USD 28.6) per ton.
The De Facto No. 1 Steel Enterprise in Shandong
According to the above-mentioned inside material, in 2004, the annual steel output of Rizhao Steel was 1.07 million tonnages; the sales income was 2.5 billion Yuan (USD 357.1 million) and the tax turned in was 2.15 million Yuan (USD 450 thousand). In 2007, its annual steel output was 7.75 million tonnages; the sales income was 28.6 billion Yuan (USD 4.09 billion) and the tax turned in was 1.378 billion Yuan (USD 196.9 million). This April, the steel output of Rizhao Steel was 3.5 million tonnages; the sales income was 14.7 billion Yuan (USD 2.1 billion) and the tax turned in was 1.24 billion Yuan (USD 177.1 million).
Previously Liao Haiting expressed that the sales income of Rizhao Steel was estimated at 50 billion Yuan (USD 7.11 billion) and the expected profit tax was 10 billion Yuan (USD 1.42 billion).
According to the report of the local media in Shandong, Shandong Steel Group Co. Ltd (Shandong Steel) made a sales income of 66.2 billion Yuan (USD 9.46 billion), a profit tax of 8.65 billion Yuan (USD 1.23 billion) and a profit of 4.967 billion Yuan (USD 709.6 million) in the first half year. However, Shandong Steel, which was established in this March, consists of Jinan Steel Group, Laiwu Steel Group and some other large-sized steel enterprises in Shandong. In terms of the single enterprises, Rizhao Steel is the largest steel enterprise in Shandong Province.
But Du’s objectives are not limited to having the largest steel enterprise in Shandong Province. He also aims at the port construction, developing and promoting ironmaking technology beyond blast furnace, etc.
Du said: “If being successful, it will not only bring us huge benefits, but also exert great and positive influence on the development of the Chinese steel industry.”
According to the above-mentioned inside material, Rizhao Steel has done the research for the 300-thousand-tonnage special port for the iron ore. At the same time, Rizhao Steel is collaborating with Beijing Iron & Steel Research Institute for the development of metallic pellet technology. By now it has entered the pilot test period. The prediction is that this item will be put into industrialized production in February 2009. According to the general construction planning, the annual output of metallic pellets is 5 million tonnages, with the expected annual sales income of 10 billion Yuan (USD 1.43 billion) and profit tax of 2 billion Yuan (USD 285.7 million).
However, the road ahead is still uneven for the growing Rizhao Steel. Shandong provincial government, in accordance with the Suggestions on the Further Acceleration of Adjusting Steel Industry Structure of Shandong Province, considers the building of a large-sized Rizhao steel base as the core of adjusting the layout of the steel industry regions in this province. Shandong Steel also has the aspiration to restructure Rizhao Steel.
Du has his own thoughts about this. Maybe he considers the combination of the private steel enterprises as another choice. “I have always been thinking about whether the combination of the private steel enterprises with a certain scale can be realized,” said Du Shuanghua.
A Different Rich Man
During the work meeting of Rizhao Steel in the first half year, Du said that there were still some blind spots, especially in the improvement of the employees’ salaries, the implementing of the human-oriented policy and the construction of the Party-masses organization. He also said that there were some blind spots and some deviation in the work of some departments.
Besides these remarks, Du also held the Rally of Building the Way of Thinking of the whole enterprise on this August 9. In this rally, Du asked the staff to study the speech of Chairman Mao in the Second Session of the Seventh Conference in Xibaipo seriously, as well as the two articles about roving bandits’ ideas (ideas or actions having noting to do with the stableness and prosperity of the whole organization). He also asked the staff to study and understand the spirit of “Two Essentials” (this spirit was proposed by Chairman Mao in the Second Session of the Seventh Conference, telling people to be modest and cautious and to keep the style of struggling hard). The staff of Rizhao Steel was also asked to further understand the deep connotation of the cooperation collaboration.
“For our enterprise, the key of making fast development in the precondition of staying stable, is to create a harmonious atmosphere for the enterprise’s inside. Such a harmonious atmosphere is deriving from the humanization management. The report of the 17th National Congress of CPC pointed out that the nature of Scientific Concept of Development was people-oriented. For the management of the enterprise, the key is to give benefits and interests to the employees and solve their problems. Only when the enterprise cares for their employees, the employees can concentrate on their work and enjoy it, so that the inside of the enterprise can stay stable and harmonious,” said Du Shuanghua.
