Chinese steel exports took a major leap to 42.6 million tonnes in 2010 and again in Q1 of 2011, these were up 20.7%.
India has reasons not to feel comfortable with China having built more than 700 million tonnes of steel capacity, leaving a lot of that unutilized at last year’s production of 626.7 million tonnes. While this is so, even then the world’s biggest maker of steel is left with large quantities of the metal after meeting domestic requirements which it must export. A neighbor where the demand for steel is growing at annual rate of around 10% and which is not finding it easy to execute new steel mills could be consciously targeted for exports by China.
Chinese exports of steel took a major leap to 42.56 million tonnes in 2010 and again in the first quarter of 2011 these were up 20.7% to 10.51 million tonnes from the corresponding period a year ago. The country imported 16.43 million tonnes of steel last year and 4.18 million tonnes between January and March 2011. Imports are generally of very high grades of steel for which China is yet to build competence. The gaps necessitating imports are sought to be filled by forging alliances with technology leaders in Japan, South Korea and the West.
Beginning 2001, Chinese steel production had grown at a CAGR of over 15%. But now coinciding with China's 12th five year plan (2011-15), steel output growth there will be slowed down to an annual average of 6%.
According to an official of the China Iron & Steel Association, the fall in profit margins to less than three per cent in recent times from over eight per cent during 2001-05 and volatility in prices of raw materials would be disincentives to grow output at the same rate as in the past. Besides finding ways to make operations more profitable, Chinese steelmakers now also have to contend with the government frown on their big carbon footprints.
SAIL chairman Mr CS Verma tells us that the global manufacturing industry is responsible for about 21% of green house gas emission. In the pollution caused by this sector, the share of steel is so high that it alone accounts for up to four per cent of world CO2 emissions.
Indian steelmakers, according to Mr Verma, will have to do a lot of cleaning up job since they are generating 1.5 to 2 times more GHG than the global benchmark. The biggest environmental offenders in our steel space are sponge iron makers who need to be disciplined. The Chinese steel industry is nearly 10 times bigger than ours and more appropriately in the present context, the identified Chinese polluting steel capacity is considerably bigger than our annual production. It is, therefore, a stupendous task for our neighbor to bring down steel related pollution to acceptable level.
A report prepared by Alliance for American Manufacturing said that "Chinese steel producers emit significantly more pollution than their counterparts in the US."
They are found to release five times as much sulphur dioxide, nearly three times more nitrogen oxide and almost 20 times more particulate matter than their counterparts in the US. Even while the Chinese industry last year accounted for 44.3% of the world steel production, its share of CO2 emission by global steelmakers is significantly more than half.
Besides the embarrassment that the steel industry’s major carbon footprints are causing the Kyoto protocol signatory China, steel production in excess of domestic requirements has proved to be a strain on the power sector. China thinks and rightly so that the best way to tackle the problem will be to build pressure on steel groups to phase out ageing, high cost and polluting capacity and encourage at the same time capacity consolidation through mergers and acquisitions.
In 2011, China shut 44 million tonnes of undesirable steel capacity. It further wants to dispense with another 100 million tonne such capacity. Equally importantly, as China is applying brake on growth, it will be selective in approving new steel projects. No doubt, rapid development of steel industry in China is coming to an end as the focus shifts to creating a number of giants with capacity of over 50 million tonnes each this has been predicted by Mr LN Mittal, drafting new age technology and shifting capacity to coastal areas for logistical and environmental reasons.
The 12th plan end will likely see top 10 groups making as much as 60% of the country’s steel and coastal areas accounting for 40% of the output. A Delhi based steel watcher says the next five years will see Beijing encouraging leading groups like Baosteel, Anshan Steel and Shougang Steel to lead restructuring and capacity concentration along identified coastal provinces. M&A is gaining steam backed as it is by the government. China so far has been outwitted by leading miners like BHP, Rio and Vale in iron ore price negotiations because its fragmented steel industry could not present a credible negotiating front.
Being the world’s biggest importer of ore has not come to China’s aid in ore price negotiations. A more consolidated industry will hopefully be able to match the wits of big miners as China steps up ore production.
India has reasons not to feel comfortable with China having built more than 700 million tonnes of steel capacity, leaving a lot of that unutilized at last year’s production of 626.7 million tonnes. While this is so, even then the world’s biggest maker of steel is left with large quantities of the metal after meeting domestic requirements which it must export. A neighbor where the demand for steel is growing at annual rate of around 10% and which is not finding it easy to execute new steel mills could be consciously targeted for exports by China.
Chinese exports of steel took a major leap to 42.56 million tonnes in 2010 and again in the first quarter of 2011 these were up 20.7% to 10.51 million tonnes from the corresponding period a year ago. The country imported 16.43 million tonnes of steel last year and 4.18 million tonnes between January and March 2011. Imports are generally of very high grades of steel for which China is yet to build competence. The gaps necessitating imports are sought to be filled by forging alliances with technology leaders in Japan, South Korea and the West.
Beginning 2001, Chinese steel production had grown at a CAGR of over 15%. But now coinciding with China's 12th five year plan (2011-15), steel output growth there will be slowed down to an annual average of 6%.
According to an official of the China Iron & Steel Association, the fall in profit margins to less than three per cent in recent times from over eight per cent during 2001-05 and volatility in prices of raw materials would be disincentives to grow output at the same rate as in the past. Besides finding ways to make operations more profitable, Chinese steelmakers now also have to contend with the government frown on their big carbon footprints.
SAIL chairman Mr CS Verma tells us that the global manufacturing industry is responsible for about 21% of green house gas emission. In the pollution caused by this sector, the share of steel is so high that it alone accounts for up to four per cent of world CO2 emissions.
Indian steelmakers, according to Mr Verma, will have to do a lot of cleaning up job since they are generating 1.5 to 2 times more GHG than the global benchmark. The biggest environmental offenders in our steel space are sponge iron makers who need to be disciplined. The Chinese steel industry is nearly 10 times bigger than ours and more appropriately in the present context, the identified Chinese polluting steel capacity is considerably bigger than our annual production. It is, therefore, a stupendous task for our neighbor to bring down steel related pollution to acceptable level.
A report prepared by Alliance for American Manufacturing said that "Chinese steel producers emit significantly more pollution than their counterparts in the US."
They are found to release five times as much sulphur dioxide, nearly three times more nitrogen oxide and almost 20 times more particulate matter than their counterparts in the US. Even while the Chinese industry last year accounted for 44.3% of the world steel production, its share of CO2 emission by global steelmakers is significantly more than half.
Besides the embarrassment that the steel industry’s major carbon footprints are causing the Kyoto protocol signatory China, steel production in excess of domestic requirements has proved to be a strain on the power sector. China thinks and rightly so that the best way to tackle the problem will be to build pressure on steel groups to phase out ageing, high cost and polluting capacity and encourage at the same time capacity consolidation through mergers and acquisitions.
In 2011, China shut 44 million tonnes of undesirable steel capacity. It further wants to dispense with another 100 million tonne such capacity. Equally importantly, as China is applying brake on growth, it will be selective in approving new steel projects. No doubt, rapid development of steel industry in China is coming to an end as the focus shifts to creating a number of giants with capacity of over 50 million tonnes each this has been predicted by Mr LN Mittal, drafting new age technology and shifting capacity to coastal areas for logistical and environmental reasons.
The 12th plan end will likely see top 10 groups making as much as 60% of the country’s steel and coastal areas accounting for 40% of the output. A Delhi based steel watcher says the next five years will see Beijing encouraging leading groups like Baosteel, Anshan Steel and Shougang Steel to lead restructuring and capacity concentration along identified coastal provinces. M&A is gaining steam backed as it is by the government. China so far has been outwitted by leading miners like BHP, Rio and Vale in iron ore price negotiations because its fragmented steel industry could not present a credible negotiating front.
Being the world’s biggest importer of ore has not come to China’s aid in ore price negotiations. A more consolidated industry will hopefully be able to match the wits of big miners as China steps up ore production.
(sourced from Business Standard)
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