May 12 MetalBiz¡ªAs the pillar industry, which boosts the Chinese national economy to move forward rapidly and healthily, the development of steel industry in China has been the focus when the world economy situation and steel industry are changing continuously. However, there are four weaknesses in the development of Chinese steel industry.
Short supply of domestic steel products
The developed countries¡¯ industrialization is a process of large consumption of natural resources and rapid accumulation of social wealth. The steel consumption has different characteristics in different development stages and industry structures. There are four stages:
One is the underdevelopment stage, when the per capital GDP is bellow $1000 and the strength of steel consumption is low; the second one is the preliminary and metaphase stage, when the per capital GDP is $1000-$2000 and the strength of steel consumption becomes stronger; the third is the metaphase and latter stage, when the per capital GDP is $2000-$4000 and the strength of steel consumption is in a high level; the last one is the mature stage, when the per capital GDP is over $4000 and the changes including optimization of industry structure, technology advance, and consumption structure of residents cause the steel consumption to slow down.
At present, China is in the metaphase, when the heavy and chemical industries boost the rapid development of manufacturing industries. In 2007, the consumption of crude steel was 434 million tons, up 13.1 percent year-on-year, while that of every ten thousand Yuan GDP was 176.1 kg, and the per capita consumption of crude steel of China was 328.7 kg. The data is lower than that of the developed countries. From 1901 to 2006, the accumulated consumption volume of Japan was 4.5 billion tons, America 7.7 billion tons and China only 3.5 billion tons. China has not reached the situation when the steel consumption is saturated, and there is still a large space for Chinese steel consumption to rise.
Restricted by factors like resources, energy and environment
Above all, the iron ore supply increase trails demand increase and China reply more on import. Actually, the iron ore resources are abundant. The reserve of iron ore is 160 billion tons in the world and the proved reserves can assure of 100 years demand. China¡¯s reserves are rich but its quality is relatively low and exploring cost is high. Since 2000, the iron ore consumption of China rose 20.1 percent every year on average and dependency on import rose to 53 percent in 2007 from the 34 percent in 2000. It will keep around 50 percent by 2012.
The lack of water resources, an important resource of steel industry, exerts enormous pressure on steel industry. Besides, due to the tight energy supply, China has a long way to go to save energy and decrease consumption. Furthermore, the strict environmental demand restricts the further development of steel industry.
The tense transport capacity increases the costs of steel mills. In 2007, the world dry bulk transportation volume was 2.992 billion tons and that of iron ore and coal occupied 51.77 percent, which increased the costs of steel mills.
High-end products have weak international competitive strength
Benefiting from the globalization and worldwide industry structure adjustment, the steel capacity and output scale of China rose rapidly to 500 million tons from 100 million tons with enormous market demand and relatively costs. The development of Chinese plate capacity has been slow. Especially the high-end plate products depend much on imports. However, since 2004, China adjusted domestic steel industry structure and promoted the capacity. Many products could meet the demand, which enhanced the export ability and China became a net export country of steel products.
Resources distribution starves for optimization
Steel industry is a technology, capital, resources and energy-intensive industry, and its competition depends on the ability of reorganization and domination to the available resources. Steel industry needs quantity of social resources. With the rapid development of world steel industry, the contradiction of tight worldwide resources becomes more and more obvious. It has become the key point to compete for and reorganize resources in the future steel industry.
In China, the distribution of steel production is inconsequential, the industry concentration is low and the products structure is unreasonable, which cause Chinese steel industry has low capacity to reorganize resources. China should promote the ability of reorganizing resources.
In one hand, we should accelerate the inside reorganization through technology and management innovation, and optimization of capital and resources. We should accelerate to eliminate obsolete capacity and decrease consumption and produce more products with high quality and high value added.
In the other hand, we should boost the reorganization of outside resources. To achieve this, we should first boost the adjustment of industry structure and then enhance the cooperation with the upstream enterprises.
China Steel Market
Four weaknesses of Chinese steel industry
May 12 MetalBiz¡ªAs the pillar industry, which boosts the Chinese national economy to move forward rapidly and healthily, the development of steel industry in China has been the focus when the world economy situation and steel industry are changing continuously. However, there are four weaknesses in the development of Chinese steel industry.
Short supply of domestic steel products
The developed countries¡¯ industrialization is a process of large consumption of natural resources and rapid accumulation of social wealth. The steel consumption has different characteristics in different development stages and industry structures. There are four stages:
One is the underdevelopment stage, when the per capital GDP is bellow $1000 and the strength of steel consumption is low; the second one is the preliminary and metaphase stage, when the per capital GDP is $1000-$2000 and the strength of steel consumption becomes stronger; the third is the metaphase and latter stage, when the per capital GDP is $2000-$4000 and the strength of steel consumption is in a high level; the last one is the mature stage, when the per capital GDP is over $4000 and the changes including optimization of industry structure, technology advance, and consumption structure of residents cause the steel consumption to slow down.
At present, China is in the metaphase, when the heavy and chemical industries boost the rapid development of manufacturing industries. In 2007, the consumption of crude steel was 434 million tons, up 13.1 percent year-on-year, while that of every ten thousand Yuan GDP was 176.1 kg, and the per capita consumption of crude steel of China was 328.7 kg. The data is lower than that of the developed countries. From 1901 to 2006, the accumulated consumption volume of Japan was 4.5 billion tons, America 7.7 billion tons and China only 3.5 billion tons. China has not reached the situation when the steel consumption is saturated, and there is still a large space for Chinese steel consumption to rise.
Restricted by factors like resources, energy and environment
Above all, the iron ore supply increase trails demand increase and China reply more on import. Actually, the iron ore resources are abundant. The reserve of iron ore is 160 billion tons in the world and the proved reserves can assure of 100 years demand. China¡¯s reserves are rich but its quality is relatively low and exploring cost is high. Since 2000, the iron ore consumption of China rose 20.1 percent every year on average and dependency on import rose to 53 percent in 2007 from the 34 percent in 2000. It will keep around 50 percent by 2012.
The lack of water resources, an important resource of steel industry, exerts enormous pressure on steel industry. Besides, due to the tight energy supply, China has a long way to go to save energy and decrease consumption. Furthermore, the strict environmental demand restricts the further development of steel industry.
The tense transport capacity increases the costs of steel mills. In 2007, the world dry bulk transportation volume was 2.992 billion tons and that of iron ore and coal occupied 51.77 percent, which increased the costs of steel mills.
High-end products have weak international competitive strength
Benefiting from the globalization and worldwide industry structure adjustment, the steel capacity and output scale of China rose rapidly to 500 million tons from 100 million tons with enormous market demand and relatively costs. The development of Chinese plate capacity has been slow. Especially the high-end plate products depend much on imports. However, since 2004, China adjusted domestic steel industry structure and promoted the capacity. Many products could meet the demand, which enhanced the export ability and China became a net export country of steel products.
Resources distribution starves for optimization
Steel industry is a technology, capital, resources and energy-intensive industry, and its competition depends on the ability of reorganization and domination to the available resources. Steel industry needs quantity of social resources. With the rapid development of world steel industry, the contradiction of tight worldwide resources becomes more and more obvious. It has become the key point to compete for and reorganize resources in the future steel industry.
In China, the distribution of steel production is inconsequential, the industry concentration is low and the products structure is unreasonable, which cause Chinese steel industry has low capacity to reorganize resources. China should promote the ability of reorganizing resources.
In one hand, we should accelerate the inside reorganization through technology and management innovation, and optimization of capital and resources. We should accelerate to eliminate obsolete capacity and decrease consumption and produce more products with high quality and high value added.
In the other hand, we should boost the reorganization of outside resources. To achieve this, we should first boost the adjustment of industry structure and then enhance the cooperation with the upstream enterprises.
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