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China’s contribution and effects on global steel industry
By Special correspondent
Aug 27, 2008
China’s steel production has gone up from 127 Mt in 2000 to 489 Mt in 2007, increasing by about 70 Mt a year. As we know, production of one tonne of steel calls for over 1.5 times of iron ore (much more in case of lean ore like China’s), one tonne of coal in various grades, half a tonne flux, 8 tonnes of water and electrical power for making and processing. Taking into account the transportation requirement of incoming material and despatch of finished products - inland and through sea, the steel industry of China needs movement of about 2500 Mt of goods and generates huge wastes and greenhouse gases as coal is the main energy producing material and reductant.
The huge appetite for material has shot up the prices of all raw materials. Iron ore contract price has gone up by 165% in last 3 years. From huge coal/coke exporter, China is now a net importer. The prices of both thermal and coking coal are going up four folds. Prices of all energy sources like crude oil, natural gas have increased due to the increased demand for energy and power. Along with these, steelmaking additives like ferro-alloys and non-ferrous metal prices have sky rocketed. The large requirement of movement of raw materials and finished products have raised sea freights by almost double and there are regular congestions in international sea-ports.
Who have benefited by such large scale increase in steel production?
No doubt, the infrastructure in China has undergone rapid improvement. Roads, bridges, housings have come up at great speed along with rise in per capita income of people and ability to spend money on consumer durables like automobiles, white goods.
Mine owners in the outside world, especially possessing iron ore are now flushed with money. There is huge rush by mining and steel companies to acquire iron ore, coal and lime stone mines all over the world including the previously unexplored areas such as Africa and South American countries. Hopefully, these undeveloped areas will now get large investments not only in mining sector but in social sectors as well as Governments and NGOs are now active for inclusive growth. The development of course will come at the cost of environment and ecology besides social and cultural effects.
The unprecedented price increase in crude oil has made the Middle east countries flushed with huge cash. Huge investments are being made in developing infrastructural projects mixed with luxury and fantasy and also setting up industries like steel, aluminum, etc. New technologies are bought at large sums of money to make green city and make their countries a sustainable economy thriving on trading, tourism, etc. besides solely resting on oil reserves.
Russia has suddenly woken up to find that it has immense resources in the form of human, energy and raw materials. They are not exporting raw material much. Increased metal and energy prices have given them plenty of cash. Their steel industries are in buying spree to acquire foreign companies. The new economic power has strengthened the Government power and confidence in taking a lot of proactive decisions.
The steel companies having their captive mines are very happy at this scenario as more the increases in raw material prices, higher is their profitability. Such companies are now going for acquiring other steel companies both domestic and foreign and also carrying out expansion of their capacities.
The current inflation has, in fact, became a boom to some industries due to unprecedented surge in the prices of products like ores, steel, cement and paper in the last three years which allowed these industries to multiply their profits several times. Strong demand for these products along with the healthy GDP growth in the country has sustained their capacity utilisation to the fullest extent.
The steel companies which are not fortunate enough in respect of raw material possessions, are making marginal profits due to high prevailing steel prices but they cannot be sustainable in the long run. The companies with advanced technology are presently depended on high value items for their survival but others are capturing the market through acquisitions of reputed steel companies. New steelmaking facilities will now come in where raw materials or energy source exist since the freight costs have gone up significantly. Only finishing facilities may be there in places nearer to the market.
The steel processing industries are facing great resistance from their consumers to pass on such exorbitant increase in steel prices – over US$ 200 per tonne in three months period from January, 2008.
Environment specialists are greatly concerned at these developments. Increased mining activities in existing and new places are generating unrest amongst the local population which disturb their lifestyles and culture. Use of carbon bearing materials like coal, oil, gas for production of metals, energy and transportation areincreasing CO
2 pollutions like never before. The UNO, IISI, many European countries are urging for development of suitable technology for reduction of greenhouse emissions so that electricity can be generated through renewable sources and CO
2 generated in industry may be trapped. These will call for a lot of investments and time no doubt but there is urgent requirement for taking appropriate measures to avoid using such large amount of fossil fuels.
Similarly for water resource, natural flows in rivers and sea are being restricted and diverted for industrial use through interconnectivity, construction of dams, etc. People are getting concerned in what form the nature will take revenge if these continue.
Steel is needed for development and improvement of quality of life. The undeveloped countries need more for constructing infrastructure for improving communications. In order to balance the ill-effect on environment, we need breakthrough technologies for generation of electricity and smelting by avoiding use of fossil fuels and foster better environment for better health and quality of life amongst all sections of people.
By courtesy of STEEL TECH, India www.steeltech-india.com
In addition, make sure to read these articles:
October 2008 crude steel production
German Steel Federation: Financial crisis reached steel industry, but growth will continue moderately
September 2008 crude steel production
Global stainless steel output is forecast to slip again this year
Global steel output rises 2.9% in August
China’s contribution and effects on global steel industry
No significant increase in stainless steel output expected this year
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