Since China’s economic reforms under the leadership of Deng Xiaoping, Chinese steel production has increased greatly and in 2015 produced 803.8 million tones of steel, over 50% of the world’s total production (World steel). Various large state-owned groups such as Baosteel, Angang Steel Company, Tangshan, and Hebei Iron and Steel lead the Chinese steel industry. However, due to lowered demand and the 2015-2016 Chinese stock market crash, the Chinese government announced large-scale closures and downsizing of China’s steel industry.
One of the first areas to be hit by steel production downsizing was the Tangshan district, which itself produces more steel than the US (abc). As a result, production is to be cut by two thirds resulting to a loss of 7,000 jobs and many workers who now have no livelihood. While these workers are owed salaries by the government, they have seen none of their money and fear for their future.
Altogether, Chinese authorities announced 400,000 people are expected to lose their jobs by 2020, but estimates go
as high as 2 million (abc). With further downsizing on the horizon, mass unemployment and social unrest may ensue until the Chinese government is able to find suitable solutions for those who lost their livelihood.
In the Chinese context, if the order of magnitude is a few thousand here and there, is this really newsworthy? [Why would it be newsworthy for an Australian publication?]
What is the structure of the industry in China? Is there anything particularly “Chinese” about it? How if at all does that affect restructuring? Probe!!
China is indeed the world’s largest manufacturer of steel. Many steel companies in Europe have been forced to layoff workers or shut down due to cheap Chinese steel exports. Many Europeans blame these job losses on the artificially low steel prices caused by government subsidies. This problem has intensified lately. China has begun to consume less raw materials recently due to slower growth and lower investment. As a result, they have been exporting their excess materials. As a result, there has been an effort in the EU to impose a tariff of steel imports. Tensions were further raised when China recently announced that it would impose a 46% import duty on a specific type of steel produced in the UK. The Chinese government justified this move saying that imports were causing damage to its domestic steel industry.
http://www.theguardian.com/business/2016/apr/01/chinese-imposes-tariff-on-eu-steel-imports-tata
Statistics reported by the steel industry in China foreshadow future economic slowdown in China and therefore foreign steel industries, as well. Benchmark steel prices sank 31 percent in China in 2015. Baoshan Iron & Steel Co., China’s second largest steel producer, reported an 83% decrease in net income in 2015. Output of steel by the country’s fourth-biggest producer decreased by 4.4% in 2015. The decreasing domestic demand for steel has caused the industry to increase its exports, which is increasing foreign competition.
http://www.bloomberg.com/news/articles/2016-03-31/welcome-to-new-ice-age-as-top-china-mill-warns-of-steel-crisis
One thing relates to the slowdown of the steal production is the rising attention in the environmental problems. Producing steel causes all kinds of pollutions such as air pollution and water pollution. Part of the slowdown is caused by the shutdown of several steel firms: “There are so many plants that are having to cut or stop production,” said Zhou Junjia, a sales manager at Baifeng Iron and Steel Corporation, noting that four privately owned steel firms nearby had recently been forced to close.
Work cited: http://www.reuters.com/article/us-china-steel-tangshan-idUSKCN0QA2GT20150806
I don’t know if China’s environmental goals are tongue-in-cheek, but they have stated multiple times their goals of reducing carbon emissions – or at least forcing them to peak within the next couple decades. Specifically, Premier Xi has said China will reduce carbon emissions so that maximum levels will be reached around the year 2030. Even though a slowdown in steel production would aid in meeting these goals, I doubt this was truly considered when deciding the future of the steel industry. Regardless, it’s something to look at.
Here are some links on China’s plan for future carbon emissions:
http://www.nytimes.com/interactive/2014/11/12/world/asia/climate-goals-pledged-by-us-and-china-2.html
http://www.theguardian.com/environment/2014/nov/12/china-and-us-make-carbon-pledge