China proves global mettle with steel-making capacity

For the past few years, the direction and health of the global steel industry is being determined by what is happening in China. The scenario is going to be the same in the coming years despite reports of an imminent drop in production and consumption of steel in that country. We can briefly review the full year of 2013 to examine this hypothesis.

China has created effective steel-making capacity of 841 million tonnes, a predominant share of 46% of the global capacity. In 2013 alone, around 22 new blast furnaces have come into operation in China.

It produced 779 million tonnes of crude steel at an annual growth rate of 7.5% against the global average of 3.5% and occupying a share of 48.5% of the total production. It consumed approximately 47 % of the global steel market. The Chinese export of steel reached 62.4 million tonnes, a growth of 12% over the previous year. Its primary export destinations are South Korea, Vietnam, Thailand, Singapore, Philippines and USA. India's share in total Chinese steel exports stood at only 2.6%.

A near self-sufficiency in steel is observed by China as its steel imports have come down at 14.1 million tonnes in 2013, leaving it to be a net exporter at 48.3 million tonnes.

Steel imports by China comprised flat products, special steel and railway products.

These are the areas where there is a gap in domestic availability. China imports little steel on price considerations unlike India.

As regards raw materials, the principle pursued by China is pragmatic and not bogged down by rhetoric and legal framework of WTO regulations. It conserves unprocessed raw materials, imposes restrictions in the form of quota/licences/taxes to make export of raw materials commercially non-viable.

China imported nearly 820 million tonnes of iron ore in 2013, 10% more than last year, mostly from Australia (51%), Brazil (19%), South Africa (5%), Iran(3%),Canada( 2%) and India ( 1.4%). Its domestic production of crude ore reached 1.4 billion tonnes. Applying the standard norm, this equals to an annual production of 468 million tonnes.

The Fe content of indigenous reserve of iron ore being low, China has deployed beneficiation and agglomeration technology on a wide scale to utilize the domestic resources fruitfully. This is why the indigenous cost of iron ore availability is higher than the CFR value of imported iron ore. China is exporting bauxite, zinc, rare earths and other raw materials under specific restrictive measures. China has produced 476.4 million tonnes of coke, exported coke of only 4.7 million tonnes, less than 1% of domestic production. It has also imported coking coal at 75.4 million tonnes.

Its production of ferro alloys stood at 37.8 million tonnes in 2013 and export of 1.2 million tonnes comprises only 3.2% of domestic production. India received only 43.3 thousand tonnes of ferro alloys from China.

China is also the top exporter of steel-containing manufactured goods like machinery and equipment, white goods and transport equipment.

The high level of indirect steel exports have helped China to enhance steel capacity utilization.