Iron and Steel In­dus­try in Trans­for­ma­tion

China Today (English) - - CONTENTS - By staff reporter LI YUAN

The iron and steel sec­tor in China has been plagued by overcapacity in re­cent years. How can this in­dus­try stage a re­vival and upgrade?

CRU­CIAL ma­te­ri­als for man­u­fac­ture, iron and steel are de­scribed by some as the “food of in­dus­try.” China now pro­duces half of the world’s out­put, and the iron and steel sec­tor has long been a pil­lar of its econ­omy. The sec­tor has, how­ever, been plagued by overcapacity in re­cent years, and this has im­peded its healthy and sus­tain­able de­vel­op­ment.

Ear­lier this year the State Coun­cil is­sued a de­cree aim­ing to dis­solve the overcapacity in China’s strug­gling iron and steel in­dus­try. It lifted the cur­tain on sup­ply- side re­form in the area fol­low­ing the de­ci­sion made at the Cen­tral Eco­nomic Work Con­fer­ence last De­cem­ber.

How can China’s iron and steel in­dus­try stage a re­vival, and achieve trans­for­ma­tion and upgrade? China To­day posed this ques­tion to Cer­ing, chair­man of the Board of China Iron & Steel Re­search In­sti­tute Group (CISRI).

Cut­ting Ex­cess Ca­pac­ity: The Trend

Cer­ing, the first Ti­betan MBA grad­u­ate in China, has been in the coun­try’s iron and steel in­dus­try since 1987, and has wit­nessed first-hand its vi­cis­si­tudes dur­ing the past decades. He be­lieves that cut­ting its re­dun­dant ca­pac­ity rep­re­sents a his­tor­i­cal trend, as China has now en­tered the post-iron and steel era.

The world saw the first iron and steel boom in Eng­land, in tan­dem with the ad­vent of the In­dus­trial Rev­o­lu­tion. Af­ter strong growth in its man­u­fac­tur­ing, in par­tic­u­lar the car- mak­ing and con­struc­tion in­dus­tries, the U.S. be­came the global cen­ter of iron and steel pro­duc­tion which rose to be one of the three pil­lars of Amer­i­can econ­omy. In the wake of WWII, the cen­ter of grav­ity of the world’s iron and steel in­dus­try shifted to Ja­pan and South Korea, and then started mi­grat­ing to China at the end of the last cen­tury. Now China is work­ing to re­duce overcapacity in its iron and steel sec­tor, clos­ing some op­er­a­tions and shift­ing oth­ers abroad.

“The changes in the cen­ter of in­ter­na­tional iron and steel pro­duc­tion chart the cy­cle of the in­dus­try. This ge­o­graph­i­cal re­lay is the re­sult of the law of in­dus­trial de­vel­op­ment,” Cer­ing said.

In the case of China’s on­go­ing ef­forts to shed ex­cess ca­pac­ity, Cer­ing warned against sim­ply clos­ing down or merg­ing cer­tain iron and steel plants, and urged re­liance on mar­ket- based ap­proaches to en­sure fair­ness and jus­tice. For in­stance, law should be strictly en­forced to pro­tect the nat­u­ral en­vi­ron­ment, save en­ergy and con­trol dis­charge of in­dus­trial waste. Tax­a­tion and fis­cal poli­cies should not fa­vor some sec­tors over oth­ers. The mar­ket should be brought into full play so that the busi­nesses that em­ploy ad­vanced tech­nolo­gies and equip­ment, sup­ply sought-af­ter prod­ucts, and con­se­quently achieve bet­ter ef­fi­ciency and ben­e­fits, will sur­vive and thrive, and their ri­vals who don’t will dis­solve.

Cer­ing in­sisted that re­mov­ing overcapacity re­quires the par­tic­i­pa­tion of so­ci­ety as a whole, in­stead of merely those com­pa­nies af­fected. “The en­ter­prises in­volved should of course bear the brunt of the re­spon­si­bil­ity, but the gov­ern­ment should as­sume a co­or­di­nat­ing func­tion, and staff mem­bers of these en­ter­prises must also co­op­er­ate,” Cer­ing said. “An im­por­tant is­sue in this re­spect is out­place­ment of laid- off work­ers, which en­tails pro­vid­ing them with train­ing and nec­es­sary as­sis­tance to help them find new jobs.” The 2016 gov­ern­ment work re­port de­clared that the cen­tral gov­ern­ment will ear­mark RMB 100 bil­lion in grants and sub­si­dies to resettle em­ploy­ees laid off from iron and steel, coal and other fac­to­ries af­fected by the drive to slash overcapacity.

“Ear­lier this year Premier Li Ke­qiang presided over a meet­ing on re­mov­ing overcapacity, thus at­test­ing to the Chi­nese gov­ern­ment’s re­solve in this re­form. Un­for­tu­nately, cer­tain en­ter­prises must re­lo­cate or shut down. We have to ra­tio­nally face this re­al­ity. If we leave things to luck, we will see direr con­se­quences.”

Cer­ing be­lieves that even en­ter­prises with su­pe­rior per­for­mance also face the press­ing need to trans­form pro­duc­tion

modes and upgrade their op­er­a­tions and prod­ucts.

Green and In­tel­li­gent Man­u­fac­tur­ing

As to the im­pact of the Made in China 2025 program on the coun­try’s iron and steel in­dus­try, Cer­ing said this in­di­cates the sec­tor’s two so­lu­tions to its trans­for­ma­tion un­der the pres­sure of cut­ting overcapacity – green man­u­fac­tur­ing and smart man­u­fac­tur­ing.

In his view, Made in China 2025 is sim­i­lar to Made in Amer­ica Again and Ger­many’s In­dus­try 4.0 in cer­tain ways, but is dis­tinct from them in oth­ers. “Over an ex­tended pe­riod the U. S. has been con­struct­ing new plat­forms by means of in­for­ma­tion tech­nol­ogy and the In­ter­net. Made in Amer­ica Again is not sim­ply bring­ing old man­u­fac­tur­ing back to the coun­try, but in­tro­duc­ing a new ver­sion on the ba­sis of the In­ter­net and In­ter­net think­ing. It there­fore can be called In­ter­net Plus,” Cer­ing ex­plained. “Ger­many has been steadily up­grad­ing its man­u­fac­tur­ing sys­tem. Its In­dus­try 4.0 is about com­bin­ing In­ter­net so­lu­tions with the ex­ist­ing man­u­fac­tur­ing foun­da­tion, an ap­proach that can be de­scribed as Plus In­ter­net.”

Cer­ing said that China’s iron and steel pro­duc­ers are also earnestly em­brac­ing in­for­ma­tion tech­nolo­gies in such fields as re­duc­tion of en­ergy con­sump­tion, en­vi­ron­men­tal mon­i­tor­ing and prod­uct track­ing. These en­deav­ors are, how­ever, un­der­taken in a desul­tory man­ner, and have yet to con­verge into an ex­ten­sive net­work. He sug­gested that China’s emerg­ing high-end man­u­fac­tur­ing adopt the In­ter­net Plus ap­proach, and con­ven­tional man­u­fac­tur­ing fol­low the Plus In­ter­net pat­tern.

China Iron & Steel Re­search In­sti­tute Group is also gear­ing up for Made in China 2025. For in­stance, the Au­to­ma­tion Re­search and De­sign In­sti­tute of the Met­al­lur­gi­cal In­dus­try, a sub­sidiary of the group, has shifted its fo­cus from generic au­to­ma­tion to en­ergy-fru­gal and en­vi­ron­men­tally- friendly man­u­fac­tur­ing and smart man­u­fac­tur­ing. Sev­eral of its ma­jor re­search projects es­tab­lished last year in­volve smart man­u­fac­tur­ing, in­clud­ing metal pow­der for 3D print­ing and emis­sion re­duc­tion tech­nolo­gies.

The group has also set up an RMB 50 million in­no­va­tion and en­trepreneur­ship fund to en­cour­age its en­tire staff to in­no­vate and launch new busi­nesses, and de­signed a struc­ture al­low­ing them to re­ceive div­i­dends from such projects. This in­cen­tive has ig­nited the en­thu­si­asm for in­no­va­tion among its em­ploy­ees, par­tic­u­larly the younger ones, and achieved good re­sults.

Mak­ing China an Iron and Steel Power

As our in­ter­view con­cluded, Cer­ing was just on his way to Ger­many to at­tend an in­ter­na­tional pow­der me­tal­lurgy event ( which will con­vene in China in 2018). “China’s me­tal­lurgy in­dus­try has main­tained close com­mu­ni­ca­tion with our for­eign peers. In the past the ex­change was one way – we learned from them. To­day it goes both ways, as we have built our own strengths and ad­van­tages, which is the premise for in-depth co­op­er­a­tion.”

One ex­am­ple is the met­al­lur­gi­cal anal­y­sis sec­tor. Wang Haizhou, a se­nior en­gi­neer with CISRI and aca­demi­cian of the Chi­nese Academy of En­gi­neer­ing, served two terms as Chair­man of the In­ter­na­tional Com­mit­tee of Anal­y­sis for the Steel and Iron In­dus­try (ICASI). Af­ter he left of­fice, the ICASI sec­re­tariat re­lo­cated to China, a de­ci­sion Cer­ing be­lieves ow­ing to China’s huge mar­ket, sound in­dus­trial foun­da­tion and strong catch-up in re­search and de­vel­op­ment.

In ad­di­tion to aca­demic ex­changes, in­ter­na­tional com­mer­cial co­op­er­a­tion in the iron and steel in­dus­try is also thriv­ing. For in­stance, Ad­vanced Tech­nol­ogy and Ma­te­ri­als Co., Ltd., a sub­or­di­nate of ICASI, ex­ports one third of its yearly out­put value of RMB 4 bil­lion, and has de­vel­oped strate­gic part­ner­ships with agen­cies and cus­tomers in mul­ti­ple coun­tries.

ICASI is also in the process of pur­chas­ing and merg­ing for­eign R&D teams and com­pa­nies. “The eco­nomic cri­sis in Europe and the U.S. has opened up more pos­si­bil­i­ties for such en­deav­ors. We have been mak­ing nec­es­sary prepa­ra­tions for about two years, in­clud­ing le­gal and fi­nan­cial au­dits, sci-tech con­sul­ta­tions, assess­ments, ne­go­ti­a­tions, hand-overs, for­eign ex­change and debt ar­range­ments, and busi­ness plans for the merged busi­nesses. It is a long process of work,” Cer­ing said.

Ac­cord­ing to Cer­ing, China’s iron and steel in­dus­try now ranks among the best in the world in terms of R&D and pro­duc­tion ca­pac­ity. Its only weak­ness is in the pro­duc­tion of cer­tain high-end, spe­cial-va­ri­ety ma­te­ri­als. “But the num­ber of ma­te­ri­als that we can­not pro­duce is be­com­ing less and less.” China im­ports less than 20 million tons of steel of var­i­ous kinds ev­ery year, an amount that has been in steady de­cline. Of these, only 200 tons are of the kinds that can­not be made do­mes­ti­cally. But even of these 200 tons, some are un­der­go­ing ex­per­i­men­ta­tion and test­ing by Chi­nese man­u­fac­tur­ers. For ex­am­ple, avi­a­tion ma­te­ri­als must un­dergo mul­ti­ple pro­ce­dures such as plane pro­to­types, test flights and air­wor­thi­ness cer­ti­fi­ca­tions.

CISRI, the largest met­al­lur­gi­cal re­search or­ga­ni­za­tion in China – and the world for that mat­ter – is com­mit­ted to two mis­sions. One is to help pro­duc­tion en­ter­prises trans­form and upgrade their op­er­a­tions and lower costs; the other is to de­velop those high-end, high­tech prod­ucts that cur­rently have to be im­ported. “China should not only be a ma­jor pro­ducer of iron and steel in the world, but also a pow­er­ful player in this sec­tor,” Cer­ing averred.

The fin­ished prod­ucts ware­house of the cold rolling plant of Shougang Jing­tang United Iron and Steel Co., Ltd. in Caofei­d­ian of He­bei Prov­ince.

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