China's Baosteel to Slash Compensation Over Demand Slump

Corporation page 28 issue 391 October 27, 2008
Translated By Liu Peng
Original article: [Chinese 1] [2]
 
Baosteel, the state-owned Chinese steel producer, was drafting a pay cut of up to 10 percent in order to cope with a domestic steel demand slump that has worsened as the global financial crisis began to dampen Asian economies.

A source from Baosteel Group's research institute told the EO, "The pay cut will affect the Group's top management level all the way down to low-level staff."

"At present, annual pay for Group's board chairman Xu Lejiang has been reduced to RMB 1.18 million, alongside adjustment to other senior managers. The whole pay cut scheme will come out soon," the source added.

Compensation at Baosteel Group has been higher than at other Chinese steel makers. Managers at or above the vice-president level had enjoyed annual salaries above RMB 1 million, while mid-level ones were around RMB 500 to 600 thousand.

Low level staff were paid RMB 60 - 70 thousand, much higher than other state-owned enterprises in Shanghai.

The scheme comes out at a time when some 60% of Chinese steelmakers probably saw losses going into October according to a report released by China Iron and Steel Association (CISA) on October 30.

The same day, the association also published data showing that in the first nine months, the whole steel industry suffered losses of up to RMB 1.1 billion, 18 times greater than during same period last year.

However, Luo Bingsheng, CISA's vice executive president, said "The situation will worsen as many companies have noticed a sharp drop in their orders, especially exports. Orders for exports in the fourth quarter and for the first quarter of 2009 saw a 50% drop when compared to the same period last year.

The profit margin of China's large-and-medium sized steel makers in September shrank from 7.61% to 1.4%.

Steel prices began to tumble since July, with prices 40% lower than they were in June, which Luo attributed to demand decreases caused by the economic contraction.

He elaborated that the contractions were evident in sectors such as automobiles, home electrical appliances, light manufacturing and machinery; in the decline in domestic real fixed asset investment; and in sharp decreases in exports.