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Major Players Future Outlook

Import and Export Foreign Players
China has been the largest steel industries in the world China has been the largest steel industries in the world driven by increasing demands for rapid urbanization and driven by many large-scale infrastructure projects. In 2007, the country produced 489.2 million tons of crude steel, increasing recording a production growth of 15.7% from the previous year, while the Chinese consumption of crude steel demands for reached 434.4 million tons, rising by 11.9% from the previous year. Ranked behind China were Japan and the rapid U.S., with a production of 120.0 million tons and 97.2 million tons respectively. urbanization and many large-scale infrastructure projects. According to China Steel and Iron Association (CISA), China produced 469.5 million tons of iron in 2007 - an increase of 15.2% from the previous year, while iron ore imports reached 383.0 million tons, increasing by 17.4% from a year ago. In late 2006, Chinese steel makers agreed on a 9.5% price raise for iron ore imports in 2007. As a result of rising iron ore prices, steel prices are expected to increase further in 2008. As demand increases, the price of iron ore is expected to rise by 65.0% in 2008, thereby translating to a hike of more than 20.0% in steel production costs.

In 2007, China recorded a higher yield rate, accounting for 36.4% of the global steel production. Within the In a bid to the industry, the output of cold-rolled wide strips, cold-rolled sheets, claddings strips, coating strips and electrical curb steel plates reached 57.9 million tons, accounting for 10.3% of overall steel products. In 2007, the consumption pollution of steel products in China totaled 518.8 million tons, of which 502.0 million tons were produced domestically - levels within accounting for 96.8% of Chinas steel market. As the production of steel increases in China, the level of waste the country in emission has also been rising, leading to serious environmental decline. In 2006, China failed to reach its the name of energy efficient and emission reduction goals, and this was largely attributed to the heavy industries such as environmental steel making. In China, steel making plants consume 20.0% more energy per ton than the world average, and protection, the Chinese produce high levels of harmful sulfur dioxide and chemical oxygen demand (COD). government has shut down factories and plants that have been identified as the sources of heavy pollutants In a bid to curb the pollution levels within the country in the name of environmental protection, the Chinese government has shut down factories and plants that have been identified as the sources of heavy pollutants. Additionally, Chinese leaders have pledged to reduce energy consumption per unit of GDP by 20.0% during the 11th Five Year Period (2006-2010). Thanks to this new direction, many Chinese steel making plants have been urged to withhold production and relocate their manufacturing operations.

Major Players
In 2007, Chinas steel industry revealed signs of consolidation in a market that was previously rather fragmented, and in need of mergers and acquisitions. Within the market, the 10 leading steelmakers produced 162.7 million tons of steel products, accounting for more than 50.0% of the countrys total output, as compared to less than 50.0% in the previous year.

In China, the government has been channeling efforts into establishing 4 key steel production bases across the country. The production bases are namely Anshan Iron and Steel Group, as well as Benxi Iron and Steel in Northeast China, which have merged in 2005 but have maintained independent operations. Other production bases include Shougang Group and Tanggang Group in North China, Baoshan Iron and Steel (Baosteel) Group and Maanshan Steel Group in East China. Lastly, there is Wuhan Iron and Steel as well as the Panzhihua Iron and Steel Group in Central China. Within Chinas steel industry, Baosteel is Chinas leading steel maker. Specializing in the manufacturing of high technology and high value-added steel products, the company supplies steel to industries including automobile, oil and natural gas explorations, as well as household appliances. Baosteel has achieved global recognition within the industry, with exports reaching 40 countries and regions worldwide. In 2006, Baosteel was ranked the fifth largest steel-producing company in the world, with a production of 22.5 million metric tons of crude steel. In 2007, the company sold 28.0 million tons of steel products, recording an increment of 20.6% from the previous year. Meanwhile, Baosteel realized pre-tax profits of US$4.69 billion, increasing by 50.0% from the previous year. In early 2007, Baosteel acquired Bayi Iron and Steel Group in the Xinjiang Uygur Autonomous Region in northwestern China, in a bid to expand its operations. In 2007, the Jiangsu Shagang Group became the second largest steel maker in China with a consolidated output of 22.9 million tons when Shagang acquired controlling stakes in three mills - Anyang Yongxing Iron and Steel, Jiangsu Xinrui Special Steel and Jiangsu Yonggang Group. Shougang Group is the seventh largest steel maker headquartered in the Chinese capital of Beijing. In line with the Chinese governments aim to reduce pollution levels in Beijing and surrounding cities before the 2008 Beijing Olympic Games in August, Shougang began to cut production by 4 million metric tons a year since the beginning of 2008. Additionally, the company is shifting its operations to Tangshan in the northern province of Hebei, where the construction of a US$9.4 billion plant is underway. According to schedule, Shougang will complete its relocation to Tangshan by the end of 2010.

Import and Export

In 2006, Chinas steel exports scaled to a record high when Chinese steel products were increasingly exported to overseas markets (with the U.S. being the largest export destination). The influx of Chinese steel has raised protests from foreign governments, as anti-dumping and countervailing measures were taken. A series of cooling efforts and anti-dumping investigations were executed by trade partners on the Chinese producers. On several occasions, steel producers in the U.S. have appealed to relevant officials, demanding measures to counter Chinas subsidies to steel manufacturers. As a result, the government reduced the export tax rebate rate from 18.0% to 15.0% in 2006 and subsequently abolished subsidies provided to steel producers. In 2006, despite a shift in governmental regulations, China emerged as the largest exporter of steel in the world with an export volume totaling 43.0 million tons - increasing by 109.6% from the previous year, while imports

amounted to 18.51 million, dropping by 28.3%. On the whole, net exports of steel reached 24.5 million tons. Meanwhile, China imported 2.5 million tons of stainless steel products, recording a decline of 20.1%. In April 2007, the Chinese government removed a 13.0% export rebate on 83 types of steel products to cool trade surplus in the steel industry. Additionally, the Chinese government levied an export tax ranging between 5.0% and 10.0% on 83 types of steel products including hot-rolled plates, wire and steel sections in June, while export taxes on steel products such as steel billets and steel ingots were raised from 10.0% to 15.0%. As a result of the implemented regulations, Chinas export of steel products in the remaining half of the year declined by 22.6% from the previous year. In 2007, China exported 62.65 million tons of steel products, increasing by 45.8% from the previous year, while imports declined by 8.8%, to reach 16.9 million tons. Amid increasing pressure from the U.S. and Europe, the China Iron and Steel Association (CISA) will be increasing export tariffs on steel products in 2008. Exports in semi-finished steel products are likely to reach 25.0%, while exports in finished steel products are expected to hit 15.0%, thereby leading to a likely decline in export values.

Future Outlook
With a slowdown in global production growth rates, China is likely to post a slight decline in the growth rates of its steel industry as well. Due to a tightening monetary policy in China in 2008, the market demand for steel is likely to decrease as a result of lower investments in fixed assets as well as fewer new projects. Following the trend observed in 2007, production costs of steel is expected to rise notably in 2008, as costs of raw materials and freight rates continue to climb. Steel exports are also expected to fall significantly, with the total export volume estimated to reduce by at least 20.0 million tons year on year. In a bid to strengthen the industry, China plans to consolidate the industry, whereby the top 10 producers within the country produce 50.0% of the total steel output by 2010. On the whole, while the Chinese steel industry is thriving, the industry is generally undergoing restructuring, and mergers and consolidations, as pricing and market mechanisms are addressed.

Foreign Players
In China, the growth of the steel industry reflects the Chinese governments role in promoting an efficient and effective structure. Companies are primarily state-owned, with a large amount of intervention and directives given by the Chinese government. Within the industry, Chinas Steel Policy provides for continued direct subsidization by means of tax refunds, lower interest rates, as well as other preferential policies. Additionally, the policy imposes restrictions on the involvement of foreign investments. As such, the industry has a heavy concentration of domestic companies, while foreign investments are relatively low. Driven by these factors, the growth of steel consumption has been estimated to drop to 10.0%. In October 2005, Arcelor Mittal, the worlds largest steel maker based in the Netherlands, engaged in one of the first equity mergers between a foreign steel company and a Chinese firm when it spent US$338.0 million in acquiring a 37.0% stake in Valin Steel Tube and Wire Co. Ltd., the tenth largest steel maker in Chinas Hunan province. It became the only foreign firm to hold direct ownership of a Chinese steel maker. In November 2007, Arcelor Mittal spent US$647 million to acquire a 28.0% stakes in the China Oriental Group, a steel product maker, thereby strengthening its presence in the country. Within the industry, Australia-listed Gindalbie Metals is a partner with its Chinese counterpart, Ansteel. In 2008, both companies entered an agreement for an AUD $1.8 billion Karara Iron Ore Project in Western Australia.

Chinas ten-year rapid rise to ascendancy

Ten years ago, when Metal Bulletin published its Top Steelmakers list for 2000, Chinas rise to become the dominant force in the global steel industry had barely begun, and was hardly anticipated. Only two Chinese steelmakers Baosteel and Anshan Steel featured in the top ten. There were only five in the top 50, and the combined output of all Chinese mills on the list was less than 10% of global output. In the accompanying text for the Top Steelmakers of 2000, Chinas steelmakers merited a single sentence, referring to the entry of two new steelmakers near the bottom of the list.

We decided that seeing the figures for another year ending in a zero was a good opportunity to look back at how our list which ranks all steelmakers with crude steel output higher than 2 million tonnes in the previous year has changed since the start of the century. Consolidation in mature economies and the proliferation of steelmakers in China has created a list dominated by Chinese steelmakers. Led by the worlds no 2 Hebei Steel, with 52.86 million tonnes of output, Chinas steelmakers occupy five of the top ten places and, for the first time, half of the top 20. Of the 116 steelmakers that made the 2 million-tonne cut, nearly half 57 were from China. And their combined output was 514.39 million tonnes, more than half of global output. This reflects not only the ballooning of steel production in China, but the relative failure according to its own goals of the Chinese industry to consolidate. The result is dozens of mid-sized steelmakers from all parts of China crowding the middle of the world rankings table. There have again been some signs of progress, with the top five Chinese steelmakers Hebei Steel, Baosteel, Wuhan Steel, Shagang, and Shougang accounting for 37% of Chinese production on the list, against one-third in 2009. Two Chinese producers Benxi Steel and Anyang exceeded 10 million tonnes last year, bringing the number of Chinese mills above that threshold considered important in China to 12. In 2001, we wrote in passing of Chinas steel policymakers wanting to "concentrate production on fewer, larger sites". They are still trying: maybe well check up on progress again in 2021.

The notable movers of 2010

There was little remarkable in the 2010 Top Steelmakers list, when compared with 2009. ArcelorMittal extended its dominance at the top of the rankings, raising output by around 24% to 90.5 million tonnes. Among the notable movers were Ukraines Metinvest, which took over the Ilyich mill, also in Ukraine, and produced 13.83 million tonnes, moving to no 23 from no 38 in the rankings. South Koreas Hyundai Steel benefits from the output of its new blast furnace works; its output rose by more than half to 52.78 million tonnes, putting the company at no.26. US Steel made a big jump, which was perhaps more reflective of the depths it plummeted to in 2009 than anything else. Its output rose 46% to 22.26 million tonnes. In China, Shougangs new Caofeidian greenfield works in Hebei province helped it boost output by nearly half to 25.84 million tonnes, putting it in Chinas top five. One major change either next year or the year after could be in Japan, where Nippon Steel and Sumitomo Metal Industries plan a merger. Based on last years figures, a unified company would produce 49.24 million tonnes, propelling it to third place.

Top Steelmakers 2000

Company Nippon Posco Arbed Group LNM Group Usinor NKK Corus ThyssenKrupp Baosteel Riva Kawasaki Sumitomo Output in tonnes (million) 29.07 28.48 24.1 22.44 21 20.56 19.96 18.09 17.72 15.57 13.01 11.65

US Steel Sail China Steel Nucor Magnitogorsk Severstal Bethlehem Steel

10.68 10.57 10.25 10.22 10.04 9.55 9.09