Disassembling a Steel Giant

The Lianshui River running through the city of Loudi in Hunan Province forms a natural trench between Valin Lianyuan Iron & Steel Group (Valin Steel) and the rest of the city, turning the more than 50-year-old steel plant into a citadel unto itself. People at Valin Steel have come to refer to it as the "10-mile steel city."

Was it ever a city full of promise? Toward the end of 1997, Hunan's three major state-controlled iron and steel enterprises – Xiangtan Steel, Valin Steel and Hengyang Steel – were restructured into Hunan Valin Iron & Steel Group. But from the beginning, Valin Group found it difficult to manage the daily operations of Valin Steel.

Established in 1958, Valin Steel now produces more than 8 million tons of steel annually, with total assets worth 37.8 billion yuan. The company also boasts 15,900 employees and booked 31.6 billion yuan in revenue last year. But in 2010, its losses stood at a hefty 2 billion yuan.