China's iron and steel industry development and its implications for Australia
Creators: name: Wang, Shiyi
Publisher: name: Charles Darwin University
Year: 1994

description: With steel production expanding from 70 million tonnes in 1991, to 80 million tonnes in 1992 and the official forecast by the Chinese government that steel production will reach 100 million tonnes by the year 2000, China's iron and steel industry is now facing one of the world's most acute iron ore shortages. This study has indicated that there is a big gap between the supply of steel and demand at present in China. The author of this thesis firmly believes that this gap will increase as the Chinese economy begins to develop further. Australia has long been seen as a main raw materials supply base for the world steel industry. Increasingly it has been recognised within Australia that its future economic development will be closely linked to that of Asia. As the largest country in Asia, China's future economic development will have important implications in Australia's economic development. It is therefore necessary to have a thorough understanding of the nature and development of China's iron and steel industry. The future implications for the further development of Australian exports of raw materials will be closely to the Chinese economic development. The most efficient way of identifying these implications appears to be by the way of a survey of the development of China's iron and steel industry. This will help to facilitate Australia's Australia's understanding of the Chinese market. In turn, this may facilitate the modernisation of China's iron and steel industry at more accelerated pace. The scarcity of qualified iron ore supply is an important barrier to the further development of China's iron and steel industry. The main aim of this thesis has been to review the development of the China's steel industry and to explore the ramifications of tht development to Australia's future entry into China's steel industry. Chapter 1 provides an historical overview of economic development in China. During the 1980s, major economic reforms have been introduced in China with an open door policy. They were designed to transform the system of Chinese economic relations from one of bureaucratic co-operation, to one of indirectly regulated market transactions. These reforms incorporated an enlargement of enterprise management decision-making, through expanding the autonomy of enterprises. The effects have been to free state-owned industries from centralised control in order to make them more market oriented. The reforms give state enterprises the right to make direct contact with overseas companies, resulting in greater trade, investment and technical co-operation. The author's research findings indicates that rapid economic development in China will increase steel production and demand. 'Chinese steel consumption was expected to grow rapidly towards the end of the decade. China had set a target of 7.2 per cent in real growth terms per annum and finished steel consumption was expected to grow at 10.8 per cent per annum. This could be achieved, if steel consumption increased from around 40 million tons to 81 million tons by 1990' (Faintly and Xin, 1985, p.71). This rapid growth will carry significant implications for Australia. Chapter 2 provides an historical overview of the Chinese iron and steel industry. Nine stages are identified which parallel the development trends of the Chinese economy and reflect the close link with the development of the Chinese economy. Chapter 3 examines the basic characteristics of China's iron and steel industry. The issues to be addressed will be: capacity local small, medium-size steel works steel imports and exports technical equipment varieties and specifications labour productivity energy consumption This chapter also provides a general outline of steelmaking technology. Chapter 4 describes the Chinese iron and steel industrial organisation and raw material supply. We commence with a general outline of China's iron ore resources. Which is presented to draw attention to availability and quality of local sources of supply with particular emphasis on the low Fe content and wide distribution of Chinese iron ore. Another factor to be considered is the raw material base, coupled with the industrial layout, which has resulted in the main iron and steel companies being located in the areas of An Ben Jin Dong Panxi Yangtze River Zhong Xia You Ta! -Gu-Lan Ba! Yuan E Bo E dong Chapter 5 focuses on the two aspects of steel demand forecasts and development strategy options. A summary is provided of previous forecasts of China's steel demand. All the forecasts have one thing in common that China's steel demand will grow substantially in the future. It appears that the main area of argument revolves around the expected rate of growth. The forecasts tend to indicate that there is a wide gap existing between the demand for steel and its production. The author's analysis indicates that by the year 2000, China will become the largest consumer and producer of steel in the world. Therefore there is no doubt that a wide gap will exist between the supply of steel and its demand in the future. Three options for the development of China's iron and steel industry have been summarised by Faintly and Xin (1985), Strategy Rehabilitation and expansion of existing enterprises. Strategy Expansion of production capacity from existing enterprises by using higher grade imported ores. Strategy 3. Expansion of capacity by building new large scale enterprises. Chapter 6 analyses the implications for Australia of the development of China's iron and steel industry. The effects on Australia's economy arising from this development are both direct and indirect. The direct effect would be that China will need to import more iron ore, pig iron, and ingots. In this respect, there is clearly a considerable opportunity for Australia's economic future. The indirect effect come from Australian exports of iron ore to Japan, Taiwan and South Korea. This will result in an increase exports of finished steel to China from these countries with a flow on effect that will indirectly increase Australia's exports of iron ore. Production increases of pig iron and crude steel in Taiwan and South Korea will increase Australian exports of iron ore to China. Future indications are that steel production in Japan and Europe is declining. As the result of China's industrial development, the steel industry will become more important in the future. This development will provide increasing opportunities for Australia to participate in China's steel industry.