China’s steel sector embraces industrial upgrade for high-quality development amid challenges

The China Iron and Steel Association holds a press conference addressing the industry’s performance in the first quarter on April 30, 2024. Photo: Yin Yeping/GT

The China Iron and Steel Association holds a press conference addressing the industry’s performance in the first quarter on April 30, 2024. Photo: Yin Yeping/GT

China’s steel sector, an important gauge of the national economy, is advancing toward high-quality development by optimizing its product structure, as reported by the China Iron and Steel Association (CISA) during a press conference addressing the first-quarter industry operation report.

Specifically, the proportion of high-end manufacturing steel, including automobiles, household appliances, and photovoltaics, increased from the 42 percent in 2020 to 48 percent in 2023, and has maintained a further upward trend since the beginning of 2024, according to the CISA.

The positive trend reflects a significant acceleration in the restructuring of the steel industry’s operating structure, industry insiders noted.

Meanwhile, businesses are contending with multiple hurdles, including diminished market demand, declining steel prices, and escalating iron ore expenses. External factors, such as heightened scrutiny targeting the Chinese steel industry overseas, compound the profitability challenges faced by enterprises, the Global Times learned from the industry body.

Speaking at Tuesday’s press conference, Jiang Wei, vice chairman and secretary general of the CISA, said that China’s steel industry is embracing high-quality development which have borne positive results so far.

The optimization of steel-related product structures is accelerating in response to ever-growing demand from burgeoning industries such as car manufacturing, shipbuilding, home appliance production, as well as the wind and solar power sectors.

The production upgrade is reflected in the corresponding export volume. In the first quarter, China’s high value-added product exports accounted for more than 35 percent, Jiang said.

Efforts are underway to enhance intelligence in steel production and management within the industry. According to a report by the CISA, surveyed companies have invested approximately 38.5 yuan per ton of steel in digital and intelligent transformation initiatives so far this year. This represents a notable year-on-year increase of 23.9 percent.

There were 40 percent of surveyed companies applying 3D visual simulation technology in their main production lines, another reflection of the industry digitalization and upgrade, according to the CISA.

In addition, domestic steel companies are actively pursuing green transformation,  another key element of high-quality development. As of April 23, 2024, a total of 136 companies had either completed or partially completed ultra-low emission transformations and undergone assessment monitoring.

Challenges persist in China’s steel industry, primarily stemming from a significant structural imbalance between market supply and demand. Difficulties also include declining steel prices and high iron ore prices, according to the CISA.

In the first quarter, the national crude steel production came to 257 million tons, a year-on-year decrease of 1.9 percent. Meanwhile, nationwide consumption of crude steel was 232 million tons, a decrease of 4.7 percent year-on-year, indicating a surplus in steel supply over demand.

National steel exports reached 25.8 million tons in the first quarter, marking a year-on-year increase of 30.7 percent, while the average export price stood at $789 per ton, reflecting a decline of 33.4 percent year-on-year, suggesting thinner profit margins for companies despite strong demand overseas.

Meanwhile, the high price of iron ore, a key raw material for steelmaking, remained elevated, serving as another factor affecting company profits. The primary cause behind this is the lack of bargaining power in international pricing negotiations, Shi Hongwei, deputy secretary general of the CISA, said on Tuesday.

Inventories of domestic steel companies were also on the rise. As of mid-March, key steel enterprises reported steel inventory levels of 19.53 million tons, the highest level since the beginning of this year and the highest level in nearly four years, trailing only the 21.41 million tons during the 2020 pandemic period, according to the CISA.

The high inventory reflects the juxtaposition of weak market demand with strong market expectations for the economy, which have supported stockpiling.

Looking ahead, China’s steel industry remains optimistic despite certain and temporary challenges.

Despite the challenges, the steel industry’s structure is continually optimizing in pursuit of high-quality development, as industry insiders said, with manufacturing figures being a reflection.

In April, China’s Manufacturing Purchasing Managers’ Index stood at 50.4 percent, down 0.4 percent from the previous month, remaining in the expansionary zone for two consecutive months. This indicates the continued recovery and development momentum of the manufacturing industry, according to data released by the National Bureau of Statistics Service Industry Survey Center on Tuesday.

As China further ramps up its investment in new energy and the development of infrastructure, which are major consumers of steel, and implements policies promoting the trade-in or the replacement of old equipment with new, there will be a boost in steel demand, industry insiders said.

GT Voice: West’s overcapacity narratives can’t define China’s cooperation with developing nations

Illustration: Liu Xidan/Global Times

Illustration: Liu Xidan/Global Times

Chile has imposed temporary anti-dumping tariffs on Chinese steel products used in the country’s mining industry in a bid to support local producers, Bloomberg reported on Monday, citing a decree published over the weekend.

The individual case came at a time when US and European media outlets have unleashed a new wave of criticism and bad-mouthing of China’s economy, raising the alarm about shocks that so-called Chinese overcapacity will have on the global economy.

For instance, a recent report by the Wall Street Journal claimed that “cheap Chinese steel exports have flooded world markets.” Such a climate of opinion is based on groundless accusations and does not hold water.

Overall, the demand for steel products in the Latin American market is on the rise, and local steel companies are struggling to keep up with this demand. The introduction of Chinese steel products into the Latin American market has proven to be beneficial to the economic development of the region. For a long time, Latin American steel companies have faced the challenge of competition from Chinese steel products, which has led to friction in steel trade, and this is not a new problem.

Local anti-dumping measures against Chinese-made goods are not a new problem, either. China has attached great importance to these issues in recent years and has taken steps to address these issues by promoting cooperation, especially by enhancing complementarity or through investment. This is completely different from the US, which has imposed bans on Chinese-made products. The entry of Chinese-made products into developing markets has generally been beneficial to the development of these countries. Moreover, China has never resorted to coercive tactics to achieve the sale of these products, unlike Western powers did in the past.

Western attempts to depict some of China’s most competitive exports as a threat to global markets clearly have ulterior motives. Such hype often ignores the fact that the reason why Chinese products, especially steel, are so competitive in the global markets is because they are not only reasonably priced but also have reliable quality.

When it comes to playing up so-called overcapacity in China, the criticism by Western politicians and media outlets of Chinese products often reeks of protectionism, and conceals an incentive to evade competition with Chinese producers.

What is even more incomprehensible is that some US politicians have criticized Chinese products such as steel and electric vehicles, giving the impression that employment and industries in the US have been significantly affected by Chinese imports. However, the reality is that they have not bought much steel or many electric vehicles from China.

This suggests that there are geopolitical purposes to their economic criticism of China. Their attempt to smear Chinese products and squeeze them out of the global market with the “overcapacity” narrative is aimed at curbing China’s development by weakening the competitiveness of Chinese products.

At a time when the West is unable to provide greener, more affordable and more practical products that align with the needs of the developing world, it is resorting to spreading misinformation about Chinese products in an attempt to hinder developing countries from accessing the necessary resources.

This approach, which highlights Western selfishness and arrogance toward developing nations, is essentially an effort to maintain Western dominance in the global economy by keeping developing countries as suppliers of low-end goods, rather than fostering them as equal partners. This self-serving attitude disregards the pressing need for industrialization and economic diversification among developing countries, an obstacle to the balanced development of the global economy.

Developing countries are facing challenges during their industrialization process, such as access to capital, technology and infrastructure development. In this regard, Chinese products offer a solution by providing raw materials and machinery at competitive prices and with reliable quality, catering to the economic development needs of these nations.

By utilizing Chinese steel, machinery and other industrial goods, developing countries can lower the costs of industrialization and expedite the pace of their industrial growth.

Moreover, China’s collaboration with developing countries goes beyond commodity trade, encompassing manufacturing and infrastructure investments. Frameworks like the Belt and Road Initiative have facilitated extensive cooperation between China and developing nations in infrastructure construction, energy development, transportation and more. This collaboration plays a crucial role in advancing the industrialization and economic growth of developing countries.

In short, Chinese products and investments offer a boost to the industrialization of developing nations. It is imperative for them to capitalize on the opportunity to collaborate with China instead of being carried away by Western narratives.