Ministry issues plans for higher quality steel and foreign equity

Foreign companies will be encouraged to participate in the reorganization of Chinese steel companies, under a plan to boost product quality released by the Ministry of Industry and Information Technology.

The development plan of iron and steel (2016-20) says that Chinese steel companies must be further internationalized through equity sharing and investment, to improve product quality and management.

Chinese steel companies will be encouraged to build production and processing bases in key markets for the Belt and Road Initiative that have good natural resources and market potential, and are also home to high-speed train and power projects. Foreign companies are invited to join the process to undertake projects in countries along the Belt and Road.

According to research by the China Metallurgical Industry Planning and Research Institute, the construction of railway, road, oil and gas pipelines will drive up the demand for steel in the Belt & Road countries.

According to the report, every 100 million yuan ($14.64 million) of railway construction will bring about demand for 3,300 metric tons of steel. The Belt & Road countries are to build 26,000 kilometers of railway for high-speed trains, requiring approximately 85.8 million tons of steel.

“More than 70 percent of the Belt & Road countries are net importers of steel and are the main export destinations of China. In addition, the construction projects in these countries will indirectly pull up steel exports,” said Li Xinchuang, president of the institute.

Under the plan, the amount of crude steel capacity in China is to be less than one billion tons by 2020, a cut of 150 million tons as demand for the commodity drops.

“Global consumption and output of crude steel in 2020 will be around 1.6 billion tons. The demand for steel will remain generally stable and rise very moderately,” says the plan.

Xin Guobin, vice-minister of the Ministry of Industry and Information Technology, said that the steel industry must adopt intelligent manufacturing to reform itself. “We have overcapacity in low-end products while the high quality products are still lacking. The Chinese economy needs more sophisticated steel products for more technology-oriented industrial development.”

Domestic consumption of crude steel is expected to be 650-700 million tons by 2020, less than the estimated output of 750-800 million tons.

The plan also requires energy consumption in the steel industry to be reduced by more than 10 percent and major pollutants must be cut by more than 15 percent.

The 10 biggest steel companies are predicted to make up about 60 percent of the industry by 2020, up from the current 34 percent.

The number of steel companies is to be reduced as efforts are concentrated on building high-quality steel bases in Zhenjiang Port (Guangzhou) and Fangchenggang Port (the Guangxi Zhuang autonomous region).