Steel industry in China

Steel industry in China

The Steel industry in China has developed over several decades into the world biggest.[1] China accounted for 36.4% of world steel production in 2007.[1] It has driven by rapid modernisation of its economy, construction, infrastructure and manufacturing industries.[1]

Contents

History

The steel industry was small and sparsely populated at the start of the twentieth century and during both world wars. Most of the steel infrastructure was destroyed during the wars, and were using Soviet technologies. China lagged the western countries in its steel industry development even though they were using central planning techniques during the early days of communist rule.[2]

China underwent rapid economic industrialisation since Deng Xiaoping's capitalist reforms which took place nearly 3 decades ago in 1978.[3]

The steel industry gradually increased it output. China's annual crude steel output was 100 million in 1996.[4]

It produced 123 million tons of steel in 1999. After its ascension to the WTO it aggressively expanded its production for its growing appetite of manufacturing industries such as automotive vehicles, consumer electronics and building materials.[3]

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. The biggest steel groups are Baosteel, Angang Steel Company, Wuhan Iron and Steel, Anshan, Tangshan, Shagang Group and Hebei Iron and Steel.[5]

In 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 Billiton, Rio Tinto and Vale.[3]

During the Global 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 stimulus around the world.[6] Prices for iron ore were negotiated on an annual contract pricing scheme.[7] [8][9][10]

Australian iron ore producers were not happy that iron prices did not reflect Spot market pricing. In 2010 pressure from BHP Billiton and Rio Tinto to move to a quarterly based index pricing succeeded.[11] Many Japanese steel mills and Chinese steel companies had to follow as demand for raw materials heated up.[11][12][13]

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.[14]

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.[14]

See also

References

  1. ^ a b c http://www.chinaknowledge.com/Business/CBGdetails.aspx?subchap=3&content=14
  2. ^ The Library of Congress, A Country Study: China, This article incorporates public domain material from websites or documents of the Library of Congress Country Studies. http://lcweb2.loc.gov/frd/cs/cntoc.html
  3. ^ a b c chinabusinessreview.net
  4. ^ William Thomas Hogan, 2000 The Steel Industry of China, Lexington Books, ISBN 0-7391-0081-5, 978-0-7391-0081-3, 80 pages
  5. ^ http://www.steelonthenet.com/production.html
  6. ^ Robert Guy Matthews. Steelmakers Crank Up Output --- Surging Production in China, Eastern Europe Puts Downward Pressure on Prices as Inventories Rise. Wall Street Journal. Eastern edition. 1 June 2010 B.1. In: ABI/INFORM Global [database on the Internet] [cited 28 June 2010]. Available from: http://www.proquest.com/; Document ID: 2048312551.
  7. ^ http://www.theage.com.au/business/china-iron-ore-price-talks-in-chaos-20100119-mj4f.html
  8. ^ http://www.theage.com.au/business/bhp-in-significant-win-on-ironore-contracts-20100330-r978.html
  9. ^ http://www.heraldsun.com.au/business/iron-ore-price-fight/story-e6frfh4f-1111115937159
  10. ^ http://www.abc.net.au/lateline/business/items/201003/s2860719.htm
  11. ^ a b http://www.news.com.au/business/bhp-strikes-short-term-iron-ore-contracts/story-e6frfm1i-1225847327811
  12. ^ http://news.smh.com.au/breaking-news-world/mining-titan-bhp-in-landmark-iron-ore-pricing-move-20100330-rahy.html
  13. ^ http://www.theaustralian.com.au/business/bhp-treads-softly-on-iron-ore-price-revolution/story-e6frg8zx-1225849061331
  14. ^ a b Matt Chambers. Rio threat to China steel mills. The Australian. 16 June 2010 32. In: ProQuest ANZ Newsstand [database on the Internet] [cited 28 June 2010]. Available from: http://www.proquest.com/; Document ID: 2058385621.

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