China's iron and steel industry development and its implications for Australia

  • Shiyi Wang

    Student thesis: Masters by Research - CDU


    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

    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

    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:
    local small, medium-size steel works steel imports and
    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
    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.

    Date of Award1994
    Original languageEnglish
    SupervisorPeter Blunt (Supervisor)

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