Steel industry in China

Last updated

The Main Plant Area of Panzhihua Iron and Steel Company The Main Plant Area of Panzhihua Iron and Steel Company.jpg
The Main Plant Area of Panzhihua Iron and Steel Company

China's steel industry, initially small and hindered by war, expanded rapidly following market reforms in 1978, eventually becoming the world's largest producer. Despite this growth, the industry faced challenges with high debt, market volatility, and environmental pressures. Rising exports from 2023-2024 led to global oversupply, price drops, and tariffs, prompting China to halt new steel mill approvals and encourage overseas investments. China's central government has also worked to phase out unprofitable "zombie" companies while pushing for stricter environmental controls on steel production.

Contents

History

China became the world's largest steel producer in the late 1990s. [1] : 101 

20th century

From the early 1900s through both world wars, China's steel industry was small and sparsely populated. The industry's infrastructure which had relied on Soviet technology was mostly destroyed during the wars.

The steel industry became a priority during the country's First Five-Year Plan period (1953–1957), when industrial development became China's primary goal. [2] : 67  Power plants, steel, mining, machinery, chemicals, and national defense were deemed high priorities. [2] : 18  [3] : 289  Among the large steel mills built or expanded under Soviet-style planning, only Anshan Iron and Steel operated close to the desired capacity by 1956. [3] : 299  During this time, slow steel production hindered China's industrial growth. [3] : 299 

As a result, Chinese leadership mandated a major increase in steel production in late 1957 and early 1958. [3] : 299  These efforts included major investments in large scale steel manufacturing as well as the reorganization of urban labor in an effort to produce steel at other scales. [3] : 299 

China underwent rapid economic industrialisation since Deng Xiaoping's market reforms which took place in 1978. [4]

The steel industry gradually increased its output. China's annual crude steel output was 100 million tons in 1996. [5]

21st century

China produced over 1 billion tonnes of crude steel in 2022, 52.9% of the world's total production, [6] and up from 123 million tonnes (121,000,000 long tons; 136,000,000 short tons) of steel in 1999. After ascension to the WTO China aggressively expanded production for export and the growing appetite of local manufacturing industries such as automotive vehicles, consumer electronics and building materials. [4] [6]

The Chinese steel industry is dominated by a number of large state-owned groups which are owned via shareholdings by local authorities, provincial governments and even the central authorities.[ citation needed ] According to China Iron and Steel Association, The top 5 steel groups by production volume in 2015 are Baosteel Group–Wuhan Iron and Steel Corporation, Hesteel Group, Shagang Group, Ansteel Group and Shougang Group. [7]

By 2008 raw materials such as Iron ore prices grew and China had to reluctantly agree to price increases by the three largest iron ore producers in the world; BHP, Rio Tinto and Vale. [4] During the 2007–2008 financial crisis, the Chinese steel mills won price reprieves as demand from their customers slowed. When the demand started to pick up again in 2009 and in 2010, the price crept back up due to higher demand for automobiles, low interest rates, government fiscal stimuli around the world. [8] Prices for iron ore were negotiated on an annual contract pricing scheme. [9] [10] [11] [12] Australian iron ore producers were not happy that iron prices did not reflect Spot market pricing. In 2010 pressure from BHP and Rio Tinto to move to a quarterly based index pricing succeeded. [13] Many Japanese steel mills and Chinese steel companies had to follow as demand for raw materials heated up. [13] [14] [15] Spot-basis pricing has caused problems for steel manufacturers such as exposing them to price fluctuation in the market and reducing the stability of resource supply. Steel mills prefer long term pricing to hedge against cost and maintain raw material supply stability. [16] Rio Tinto has said it will cancel contracts and sell the steel on the spot markets if Chinese steel mills back down on the new quarterly pricing regime. [16]

In 2011 China was the largest producer of steel in the world producing 45% of the world's steel, 683 million tons, an increase of 9% from 2010. 6 of 10 of largest steel producers in the world are in China. Profits are low despite continued high demand due to high debt and overproduction of high end products produced with the equipment financed by the high debt. The central government is aware of this problem but there is no easy way to resolve it as local governments strongly support local steel production. Meanwhile, each firm aggressively increases production. [17]

China was the top exporter of steel in the world in 2008. Export volumes in 2008 were 59.23 million tons, a 5.5% fall over the previous year. [18] The decline ended China's decade-old steel export growth. As of 2012 steel exports faced widespread anti-dumping taxes and had not returned to pre-2008 levels. Domestic demand remained strong, particularly in the developing west where steel production in Xinjiang was expanding. [17]

On 26 April 2012 a warning was issued by China's bank regulator to use caution with respect to lending money to steel companies who, as profits from the manufacture and sale of steel have fallen, have sometimes used borrowed money for speculative purposes. According to the China Iron and Steel Association the Chinese steel industry lost 1 billion Rmb in the first quarter of 2012, its first loss since 2000. [19]

As of 2015 the global steel market was weak with both Ukraine and Russia attempting to export large amounts of steel. [20] Weak domestic demand in 2014 resulted in record exports of 100 million metric tons of steel by the Chinese steel industry. [21]

In 2015, China produced 49.6% of the world's steel. [1] : 101 

Efforts by the Chinese Ministry of Environmental Protection under the Action Plan for the Prevention and Control of Air Pollution has resulted in pressure on steel mills in Linyi and Chengde to employ environmental protection measures on pain of being closed down. [22]

In the context of lowered demand (see also 2015–16 Chinese stock market crash), in 2016 the Chinese state announced large scale closures and redundancies in heavy and primary industries, many of which were functioning as zombie companies, with 1.8 million redundancies (15% of workforce) in the coal and steel industries planned to take place by 2020. [23]

Amidst the Chinese property sector crisis and weakening demand for steel at a domestic level, China's steel exports surged in 2023 and 2024, primarily going to developing countries. This glut triggered a substantial decline in the price of steel at a global level, which in turn prompted another wave of tariffs against Chinese steel from both developed and developing countries. The Chinese government responded to the steel glut by suspending approvals of new steel mills in August 2024. Additionally, Chinese steelmakers hoping to retain a presence in foreign markets have increased foreign investments in steel mills abroad, hoping to remedy excess capacity. [24] [25] [26]

As of at least 2024, the Chinese steel industry is highly fragmented, with a large number of companies. [1] : 101 

List of companies in China

See also

Related Research Articles

<span class="mw-page-title-main">Pilbara Iron</span> Mining company

Pilbara Iron is a wholly owned subsidiary of the multinational Rio Tinto Group, that manages assets for Hamersley Iron Pty Ltd, a wholly owned subsidiary of Rio Tinto, and Robe River Iron Associates, an unincorporated joint venture between Rio and three Japanese steel companies Mitsui Iron Ore Development P/L (33%), Nippon Steel Australia P/L (10.5%) and Sumitomo Metal Australia P/L (3.5%).

<span class="mw-page-title-main">Iron ore</span> Ore rich in iron or the element Fe

Iron ores are rocks and minerals from which metallic iron can be economically extracted. The ores are usually rich in iron oxides and vary in color from dark grey, bright yellow, or deep purple to rusty red. The iron is usually found in the form of magnetite (Fe
3O
4, 72.4% Fe), hematite (Fe
2O
3, 69.9% Fe), goethite (FeO(OH), 62.9% Fe), limonite (FeO(OH)·n(H2O), 55% Fe), or siderite (FeCO3, 48.2% Fe).

<span class="mw-page-title-main">BHP</span> Australian multinational mining and petroleum company

BHP Group Limited, formerly known as BHP Billiton, is an Australian multinational mining and metals public company headquartered in Melbourne, Australia.

<span class="mw-page-title-main">Rio Tinto (corporation)</span> Anglo-Australian multinational mining company

Rio Tinto Group is a British-Australian multinational company that is the world's second largest metals and mining corporation. It was founded in 1873 when a group of investors purchased a mine complex on the Rio Tinto, in Huelva, Spain, from the Spanish government. It has grown through a long series of mergers and acquisitions. Although primarily focused on extraction of minerals, it also has significant operations in refining, particularly the refining of bauxite and iron ore. It has joint head offices in London, England and Melbourne, Australia.

<span class="mw-page-title-main">Steel mill</span> Plant for steelmaking

A steel mill or steelworks is an industrial plant for the manufacture of steel. It may be an integrated steel works carrying out all steps of steelmaking from smelting iron ore to rolled product, but may also be a plant where steel semi-finished casting products are made from molten pig iron or from scrap.

<span class="mw-page-title-main">Baowu</span> Chinese iron and steel company

China Baowu Steel Group Corp., Ltd., commonly known as Baowu, is a state-owned iron and steel company headquartered in the Baosteel Tower in Pudong, Shanghai, China. The company was formed by Baosteel Group absorbing its smaller state-owned peer, Wuhan Iron and Steel Corporation in 2016. It is the world's largest steel producer.

<span class="mw-page-title-main">Companhia Siderúrgica Nacional</span> Brazilian steelmaker

Companhia Siderúrgica Nacional (CSN) lit. 'National Siderurgy Company' or 'National Steel Company' is the largest fully integrated steel producer in Brazil and one of the largest in Latin America in terms of crude steel production. Its main plant is located in the city of Volta Redonda, in the state of Rio de Janeiro. Its current CEO is Benjamin Steinbruch.

<span class="mw-page-title-main">Mining in Australia</span> Primary sector industry

Mining in Australia has long been a significant primary sector industry and contributor to the Australian economy by providing export income, royalty payments and employment. Historically, mining booms have also encouraged population growth via immigration to Australia, particularly the gold rushes of the 1850s. Many different ores, gems and minerals have been mined in the past and a wide variety are still mined throughout the country.

The global steel industry has been going through major changes since 1970. China has emerged as a major producer and consumer, as has India to a lesser extent. Consolidation has been rapid in Europe. According to the 2019 International Energy Agency (IEA) report, the iron and steel industry directly contributed 2.6 Gt to global CO2 emissions and accounted for 7% of global energy demand. Singapore is the world's main trading hub for iron, with about 90% of the world's iron ore derivatives traded on their stock exchange.

Aluminium in Africa originates from bauxite, and within Africa is primarily found in Guinea, Mozambique and Ghana. Guinea is by far the biggest producer in Africa, and is a world leader in bauxite production.

<span class="mw-page-title-main">Mining in Iran</span>

Mining in Iran is still under development, yet the country is one of the most important mineral producers in the world, ranked among 15 major mineral-rich countries, holding some 68 types of minerals, 37 billion tonnes of proven reserves and more than 57 billion tonnes of potential reserves worth $770 billion in 2014. Mineral production contributes only 0.6 percent to the country's GDP. Add other mining-related industries and this figure increases to just four percent (2005). Many factors have contributed to this, namely lack of suitable infrastructure, legal barriers, exploration difficulties, and government control.

Before 1800 A.D., the iron and steel industry was located where raw material, power supply and running water were easily available. After 1950, the iron and steel industry began to be located on large areas of flat land near sea ports. The history of the modern steel industry began in the late 1850s. Since then, steel has become a staple of the world's industrial economy. This article is intended only to address the business, economic and social dimensions of the industry, since the bulk production of steel began as a result of Henry Bessemer's development of the Bessemer converter, in 1857. Previously, steel was very expensive to produce, and was only used in small, expensive items, such as knives, swords and armor.

<span class="mw-page-title-main">Industry of China</span> Manufacturing and economic sector of China

The industrial sector comprised 38.3% of the gross domestic product (GDP) of China in 2023. China is the world's leading manufacturer of chemical fertilizers, cement and steel. Prior to 1978, most output was produced by state-owned enterprises. As a result of the economic reforms that followed, there was a significant increase in production by enterprises sponsored by local governments, especially townships and villages, and, increasingly, by private entrepreneurs and foreign investors, but by 1990 the state sector accounted for about 70 percent of output. By 2002 the share in gross industrial output by state-owned and state-holding industries had decreased with the state-run enterprises themselves accounting for 46 percent of China's industrial output. In November, 2012 the State Council mandated a "social risk assessment" for all major industrial projects. This requirement followed mass public protests in some locations for planned projects or expansions.

The mineral industry of Mozambique plays a significant role in the world's production of aluminium, beryllium, and tantalum. In 2006, Mozambique's share of the world's tantalum mine output amounted to 6%; beryllium, 5%; and aluminium, 2%. Other domestically significant mineral processing operations included cement and natural gas.

<span class="mw-page-title-main">Uranium mining in Australia</span> Mining in Australia

Radioactive ores were first extracted in South Australia at Radium Hill in 1906 and Mount Painter in 1911. 2,000 tons of ore were treated to recover radium for medical use. Several hundred kilograms of uranium were also produced for use in ceramic glazes.

<span class="mw-page-title-main">Metal production in Ukraine</span> Dominant heavy industry in the country

Metal production, in particular iron and steel industry, is the dominant heavy industry in Ukraine. Ukraine is the world's eighth largest producer and third largest exporter of iron and steel (2007). Ukrainian iron and steel industry accounts for around 2% of worldwide crude steel output, 5% to 6% of the national gross domestic product and 34% of Ukrainian export revenue. In 2007 it employed 420,000 people – 10% of industrial labor and 2% of the total workforce. It has the highest, by a wide margin, revealed comparative advantage of all branches of the Ukrainian economy. The industry peaked at 42.8 million tonnes in 2007 but has been gravely affected by the financial crisis of 2007–2010 and declined to 29.8 million tonnes in 2009.

The Eastern Range mine is an iron ore mine in the Pilbara region of Western Australia, 10 kilometres south-east of Paraburdoo.

<span class="mw-page-title-main">Iron ore mining in Western Australia</span> Mining in Western Australia

Iron ore mining in Western Australia, in the 2018–19 financial year, accounted for 54 percent of the total value of the state's resource production, with a value of A$78.2 billion. The overall value of the minerals and petroleum industry in Western Australia was A$145 billion in 2018–19, a 26 percent increase on the previous financial year.

<span class="mw-page-title-main">Nickel mine</span> Mine that produces nickel

A nickel mine is a mine that produces nickel. Some mines produce nickel primarily, while some mines produce nickel as a side-product of some other metal that has a higher concentration in the ore.

In 2022, the United States was the world's third-largest producer of raw steel, and the sixth-largest producer of pig iron. The industry produced over 74 million net tons per year as of November 2024. Most iron and steel in the United States is now made from iron and steel scrap, rather than iron ore. The United States is also a major importer of iron and steel, as well as iron and steel products.

References

  1. 1 2 3 Massot, Pascale (2024). China's Vulnerability Paradox: How the World's Largest Consumer Transformed Global Commodity Markets. New York, NY, United States of America: Oxford University Press. ISBN   978-0-19-777140-2.
  2. 1 2 Hou, Li (2021). Building for Oil: Daqing and the Formation of the Chinese Socialist State. Harvard-Yenching Institute monograph series. Cambridge, Massachusetts: Harvard University Asia Center. ISBN   978-0-674-26022-1.
  3. 1 2 3 4 5 Harrell, Stevan (2023). An Ecological History of Modern China. Seattle: University of Washington Press. ISBN   9780295751719.
  4. 1 2 3 "China's Steel Sector in Transition". Archived from the original on 21 February 2013. Retrieved 27 June 2010.
  5. ↑ William Thomas Hogan, 2000 The Steel Industry of China, Lexington Books, ISBN   0-7391-0081-5, 978-0-7391-0081-3, 80 pages
  6. 1 2 "World Steel in Figures 2022" . Retrieved 26 February 2023.
  7. ↑ "World Steel Association - Top steel-producing companies". Archived from the original on 19 July 2016. Retrieved 26 July 2016.
  8. ↑ Matthews, Robert Guy (1 June 2010). "Steelmakers Crank Up Output: Surging Production in China, Eastern Europe Puts Downward Pressure on Prices as Inventories Rise". Wall Street Journal. p. B1. ProQuest   2651616907.
  9. ↑ "China iron ore price talks in chaos". Theage.com.au. 20 January 2010. Retrieved 25 June 2017.
  10. ↑ "BHP Billiton in 'significant win' on iron-ore contracts". The Age . 30 March 2010. Retrieved 25 June 2017.
  11. ↑ "Iron ore price fight | Herald Sun". www.heraldsun.com.au. Archived from the original on 30 December 2012. Retrieved 3 February 2022.
  12. ↑ "Lateline Business – 30/03/2010: BHP moves to short-term ore contracts". Abc.net.au. 30 March 2010. Retrieved 25 June 2017.
  13. 1 2 "BHP strikes short term iron ore contracts | News.com.au". Archived from the original on 2 April 2010. Retrieved 27 June 2010.
  14. ↑ Talek Harris (30 March 2010). "Mining titan BHP in landmark iron ore pricing move". News.smh.com.au. Retrieved 25 June 2017.
  15. ↑ "BHP Treads Softly on Iron Ore Price Revolution". The Australian . Retrieved 25 June 2017.
  16. 1 2 Chambers, Matt (16 June 2010). "Rio threat to China steel mills". The Australian. p. 32. ProQuest   375460312.
  17. 1 2 "In China's Floundering Steel Sector, the Burden of Politics". New York Times . Reuters. 3 May 2012. Retrieved 4 May 2012.
  18. ↑ Steel exports fall in 2008 – People's Daily Online. English.people.com.cn (12 February 2009). Retrieved on 6 August 2010.
  19. ↑ Simon Rabinovitch; Leslie Hook (4 June 2012). "China warns on lending to steel plants". Financial Times . Retrieved 4 June 2012.
  20. ↑ Manolo Serapio Jr. and Maytaal Angel (27 February 2015). "Cheap is king: Russia, Ukraine add to China steel export flood". Reuters. Retrieved 5 March 2015.
  21. ↑ Neil Gough (11 March 2015). "For Chinese Economy, Steel Goes From Strength to Weakness". The New York Times. Retrieved 11 March 2015. China shipped a record 100 million metric tons of steel overseas in the 12 months to the end of February, a 55 percent increase from the previous 12 months.
  22. ↑ "China Cracks Down on Steel's Smog". The New York Times. No. The New York Times. Reuters. 2 March 2015. Retrieved 5 March 2015.
  23. ↑ Petricic, Sasa (3 March 2016), "Massive layoffs coming as China confronts its overbuilt 'zombie economy'", CBC News
  24. ↑ "China Puts Brakes on New Steel Mills With Industry in Crisis". Bloomberg. 22 August 2024.
  25. ↑ "Chinese overcapacity is crushing the global steel industry". The Economist. 17 September 2024.
  26. ↑ "The world's largest steel industry is going through a 'winter' amid a supply glut and weak demand". CNBC. 21 August 2024.

Further reading

This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.