Weight of history: Chongqing Steel and China's state sector dilemma

CHONGQING, China: A year and a half ago, Chongqing Iron and Steel Corp , China's oldest steelmaker, was rescued from the brink of bankruptcy in a deal hailed as a shining example of how struggling state companies can be revamped.

"Some in the West used to call steel a sunset industry, but I want to tell everyone that there's no such thing as a sunset industry that is still increasing its assets," Four Rivers chairman Zhou Zhuping said in a speech last November.W.L. Ross & Co has experience with distressed steel assets in the United States, buying bankrupt mills such as Bethlehem Steel, which it sold to Mittal, now ArcelorMittal, the world's largest steelmaker, in 2002.

In recent years, it has struggled to compete in an increasingly crowded market, and by 2017 it was on the brink of shutting down before a rescue deal restructured 40 billion yuan of debt.Though the company has since turned a profit, critics say the rescue mostly shows that well-connected state firms are too big to fail.

As a specialty shipping plate manufacturer, the firm also faced much higher logistics costs than its rivals, and it was unable to meet local demand for the cold-rolled steel used by auto and home appliance manufacturers. Even though it was operating at only a third of its capacity, the local government was urging it to expand further, with Chongqing's mayor, Huang Qifan, saying in 2011 it would aim to become a"100-billion yuan enterprise" within four years.

After years of losses, CISC turned profitable in 2018. Its interim report this year singled out Baosteel's intervention as a key reason for the turnaround.

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