Chinese Iron and Steel Industry: Large-Scale Mergers to Ease Overcapacity

Chinese Iron and Steel Industry:
Large-Scale Mergers to Ease Overcapacity
01
Large-Scale Mergers to Ease
Overcapacity
Written by Yichen Mao
yichen.mao@uzabase.com 2016/3/23
Industry Highlights
Industry Suffering from Overcapacity, Push to Strengthen
Exports
China’s iron and steel industry is facing a harsh winter due to overcapacity and
falling product prices, with experts calling for a boost in mergers and export
activity in order to resolve these issues. However, the progress of mergers and
reorganisation has essentially been precluded by local governments that are
burdened with massive debts, and the export trade— although well-supported by
government policy— has encountered backlashes against anti-dumping from
overseas markets.
Companies Move toward Consolidation and Mergers
Despite the corruption in local government, it is anticipated that, in tandem with
global trends, a number of large-scale mergers and acquisitions among Chinese
iron and steel manufacturers will take place over the period of 2015–2020. As the
market becomes consolidated, it is likely that production will be concentrated
towards the coastal region, with the emergence of two to three conglomerates in
Northern and Eastern China.
Aiming for Domestic Supply of High-End Products
The automobile and energy resource industries will gradually replace the
construction industry— which currently holds a roughly 60% market share— to
become the largest sources of demand for steel materials. At present, high-end
industries are dependent upon imports of special alloys of the kind that are often
used in facilities such as nuclear power generators. The establishment of a
stronger system for technological research, development, and management
should enable the supply of such materials in future.

02
Catalogue
Background p.3
Macroeconomics of China p.4
Basic Policies and Principles of the Xi Government p.5
Beijing’s Two Biggest Concerns p.6
Analysis – Chinese Iron and Steel Industry p.7
Classification and Value Chain p.8
Policy Trends p.9
Major Tasks and Issues p.10
Production Areas: Characteristics and Trends (Map Attached) p.12
Finding the Way Out: Exports and Minor Boost of Domestic Demand p.17
Elimination of Overcapacity by 2020 p.20
Involvement in Global Merger Trends p.22
Speculation of Local Governments and Enterprises p.23
Industry Players (Attachment) p.24
Companies Accelerating Entry into Overseas Markets Despite Anti-dumping
Measures p.26
Steel Material Prices Dropping, Likely to Plunge Even Faster p.34
A Harsh Winter for the Industry: From the Perspective of Revenue Model p.38
Eastern China: Product Unit Price Relatively High, Expected to Recover Soon p.40
Steel Material Exports Increasing, While Imports are Sluggish p.41
Looking Ahead: Future Trends p.42

03
Background
○ Macroeconomics of China
○ Basic Policies and Principles of the Xi Government
○ Two Major Current Issues: Overcapacity in Major Industries and Swelling
Debts Held by Local Governments

04
Macroeconomics of China
In 2010, China was ranked second in the world in terms of GDP. However, its
GDP per capita remained low at USD 7,750 (as of 2014) and is equivalent to that
of mid- to low-income countries, exhibiting the gap with OECD countries.
There is a significant gap in economic development between coastal regions
(including special economic zones) and inland regions, with China’s top 30 cities
by GDP accounting for almost 50% of the country’s total GDP. Evening out these
regional differences is one of the major tasks for the Chinese government.
The figures of each key index disclosed by the Chinese Academy of Social
Science are either falling year-on-year or growing by a very small amount.
Although these figures are said to be “adjusted” to fit government targets, they
nonetheless demonstrate an economic slowdown in the market.
The reorganisation of China’s iron and steel industry has been drawing
worldwide attention because it is related to a multitude of industries including
infrastructure construction, machinery and equipment, shipbuilding,
automobiles, and household appliances.
Finally, it is important for industry observers to pay close attention to the Xi
government’s upcoming 13th Five-Year Plan (2016–2020). Such policies have a
substantial influence on industry development in China.

05
Basic Policies and Principles of the Xi Government
Doubling Both GDP and Income per Capita in Rural and
Urban Regions by 2020 from 2010
The Chinese government under the previous Hu-Wen Administration (2003–
2012) revised its economic development framework from “a stabilised and
relatively rapid growth” to “a sustainable steady growth”, and reduced its target
average annual GDP growth rate from 10% to 7%, pulling itself out of its
number-obsessive focus on double-digit growth.
*The Chinese government has been extraordinarily resolute in its commitment to
show 7% GDP growth, using obscure calculation methods to do so. Therefore, there
are some economists who claim that China’s 7% GDP growth is essentially 0% in OECD
countries, and anything below 7% indicates a negative growth.
The Chinese government has also attempted to shift its economic development
focus from export and investment to domestic demand, under which
investment, consumption, and exports play equal roles.
Improving Livelihood Stability and Promoting Urbanisation
in the Mid- to Long-Term (By 2020)
The Chinese government aims to improve livelihood stability and achieve
economic recovery through boosting construction of indemnificatory housing
for low- to mid-income households and exploring further development of its
urbanisation projects, under which six new districts (to be directly administered
by the central government) will be established.
China’s market mechanisms will undergo structural reform, wherein large-scale
government expenditure will be curbed to restrain the country’s swelling debts
and industrial sectors such as railway investment will make efforts to lure more
private capital.
The Belt and Road Strategy, together with the establishment of the Asian
Infrastructure Investment Bank (AIIB), will be conducive to enhancing China’s
influence within Asia and prevent the country from becoming isolated. It will
also help to export China’s excess production capacity.

06
Beijing’s Two Biggest Concerns
Overcapacity in Major Industries
It is believed that China’s current overcapacity crisis can be attributed to the
CNY 4 trillion economic stimulation package that was launched in 2009.
In addition to the iron and steel industry, other industries such as cement,
shipbuilding, and solar power panel manufacturing are also facing similar
overcapacity issues.
The government has taken initiatives to combat this by discarding ageing and
outdated facilities, prohibiting manufacturers from blind expansion of their
production scales, and attempting to streamline the industry through
consolidation.
However, the issue of overcapacity remains unresolved, with a large number of
companies in the iron and steel industry showing blatant disregard for the
central government’s orders and continuing to increase their output capacity.
Regional Issues
On a regional level, there are issues such as the accumulation of debt by local
governments, environmental pollution (air, soil, and water) due to the
abovementioned blind expansion in the industry, and regional unbalances in
economic development.
In addition, trends such as a decreasing population and unfavourable sales of
real estate have become increasingly significant in Tier 2 and 3 cities as youths
are leaving their hometowns.

07
Analysis – On China’s Iron and Steel Industry
○ Industry Overview: Classification and Value Chain
○ Industry Overview: Policy Shift
○ Industry Overview: Major Tasks and Issues
○ Production Region Characteristics: Concentration in Northern and Eastern
China
○ Production Region Characteristics: Shift Towards Riverside and Coastal
Regions
○ Market Trends: Finding the Way Out: Minor Boost of Domestic Demand
and Exports
○ Market Trends: Elimination of Overcapacity by 2020
○ Potential of Merger: Global Merger Trends
○ Potential of Merger: Speculation of Local Governments and Enterprises
○ Potential of Merger: Industry Players (Attachment)
○ Market Trends: Companies Accelerating Entry into Overseas Markets
Despite Anti-dumping Measures (Attachment)
○ Market Trends: Steel Material Prices Dropping, Likely to Plunge Even
Faster
○ Market Trends: Industry Facing Harsh Winter from the Perspective of
Revenue Model
○ Market Trends: Eastern China Expected to Recover Sooner than Northern
China
○ Market Trends: Steel Material Exports Increasing, While Imports are
Sluggish

08
China’s Iron and Steel Industry – Industry Overview
Classification and Value Chain
Crude Steel Classification
Based on ISO4948/1 and ISO4948/2, the former National Technology Inspection
Bureau (currently AQSIQ) stipulated and implemented GB/T13304-91 pertaining
to steel classification in 1991. Depending on steel composition, crude steel is
classified into four categories—non-alloy steel, low-alloy steel, alloy steel, and
stainless steel. Note that the General Administration of Customs of the People’s
Republic of China (the Customs) collects data for stainless steel separately due
to its importance.
Value Chain
As shown below, one tonne of crude steel is made from 0.92 tonnes of raw iron,
0.15 tonnes of iron scrap, and 0.02 tonnes of iron alloy.
By demand, the construction materials and machinery (including working tools
and equipment) industries accounted for a high share of the market at 54.7%
and 19.5%, respectively, in 2014. The automobile industry, which is believed to
be latent in growth, followed with a share of 6.5%.
China Iron and Steel Industry Value Chain
Source: Uzabase

09
China’s Iron and Steel Industry – Policy Trends
Influence from Policies
In China, it is not uncommon that government policies have a great impact on
an industry’s development course. The iron and steel industry is no exception,
being directly affected by the policies shown below.
Major Policies for Iron and Steel Industry
12th Five-Year Plan
13th Five-Year Plan
*Adjustment Plan for the Iron and Steel Industry
Content
- Comprehensive reorganisation of steel
manufacturers
- Strengthening R&D of high-technology
materials
- Leading manufacturers taking predominance and
forming market order through reorganisation
- Effective utilisation of iron scrap
- Improvement in energy-saving development and
diminishing environmental pollution
Numeric
Targets
- Top 10 companies’ output of crude steel should
account for more than 50% of industry total by
2010
- Decrease output of steel to shift focus to high-
intensity, erosion-resistant, and high-tech
materials (as of 2011 products that meet
advanced global standards accounted for less
than 30% of total output)
- Increase R&D expenses (R&D expenses of
companies above the designated size should
amount to 1.1% of their main business revenue;
global average: 3%)
- Top 10 companies’ output should account for at
least 60% of industry total by 2025; form 3–5 steel
manufacturing conglomerates that have international
competitiveness
- Streamline collection, process, and distribution;
increase the utilisation rate of iron scrap to 30% by
2025
- Decrease energy consumption to 560kg (converted
into coal), water consumption to 3.8 cubic metres or
less, and sulphur dioxide emission to 0.6 kg per tonne
of crude steel output by 2025
- Improve productivity of major and mid-sized steel
manufacturers to 1,000 tonnes/person and above, and
that of advanced manufacturers to 1,500
tonnes/person and above
- Increase R&D expenditure share to 1.7% and above
- Increase penetration rate of Manufacturing Execution
System (MES) to 80% and above
- Generate sales from e-commerce with a share
exceeding 20%
Achievement
- Reorganisation failed
- Top 10 companies’ output accounted for 33.6%
of industry total as of 2014
- Decrease in output failed
- CNY 4 trillion economic stimulus package led to
a flood of small- and medium-sized iron and steel
mills in this industry
N/A
Institution of
Disclosure
Ministry of Industry and Information Technology Ministry of Industry and Information Technology
Year of
Disclosure
2005 2015
Source: by UZABASE based on various materials

10
China’s Iron and Steel Industry – Major Tasks and Issues
Chinese Iron and Steel Industry Reform:
Major Remaining Tasks and Issues After the Twelfth Five-Year Plan
Tasks Issues
Overcapacity
- Output capacity enhanced at a faster pace than reduction
Local governments extending support to local manufacturers
Streamlining and
Reorganisation
- Standstill of integration progress
Failure of mergers and acquisitions: Anshan Iron & Steel (CHN) and Benxi Steel (CHN); Baosteel
(CHN) and Wuhan Iron and Steel (CHN); Hebei Iron & Steel (CHN) and local enterprises
- Strong reluctance from local governments (refer to the graph below about the situation in
Hebei Province)
- Because SMEs play an important role in tax payment and providing job opportunities in local
regions, governments tend to act behind the scenes to hamper the progress of mergers and
acquisitions
Elimination of Ageing
Facilities and
Concentrated
Introduction of New
Facilities
- Deteriorated performance of major steel manufacturers
Energy-Saving and
Emission Reduction
- Administrative punitive measures insufficient
- Many SMEs maintain or even increase their energy consumption after paying a small fine
- Back-scratching alliances between law enforcement bodies and local enterprises are not
uncommon, so actual punishment on manufacturers is negligible
Source: Uzabase
11974.36
2869.04 2704.51 2439.38 2377.01 2126.5 2088.36 1936.79 1760.14 1610.64
0
2000
4000
6000
8000
10000
12000
14000
IronandSteel
PowerGeneration
CoalMining
MetalProducts
ChemicalMaterialsandProducts
Petrochemicals
ProcessedFarmandSideline
Products
Non-MetallicOreProducts
ElectricalAppliances,Machinery,and
EquipmentManufacturing
Textile
10,000CNY
Hebei Province: Output by Industry (2013)

11
It has proven difficult to enforce the reduction of production output and
stimulate M&A activity in Hebei Province. The reason for this is twofold: one,
because the iron and steel industry accounts for more than 25% of the region’s
total industrial output; and two, because 75% of steel manufacturers in the area
are state-run companies.

12
Chinese Iron and Steel Industry – Major Tasks and Issues
Since 2006, China has been gradually discarding ageing and outdated
equipment and closing down SMEs in an attempt to curb the output capacity of
the iron and steel industry.
However, despite such efforts in the elimination of outdated equipment, output
reduction has not been progressing as planned due to the number of enduring
small- and medium-sized iron and steel mills in Northern China and the
successive openings of new iron manufacturing plants in coastal regions.
Note that the overall statistics may not be highly accurate because the industry
lacks concentration and there are a large number of SMEs that have joined the
China Iron and Steel Association (CISA).
Output Reduction Plan and Results
Policy 12th Five-Year Plan 13th Five-Year Plan
Period 2011–2015
National People’s
Congress
(2008–2012)
2016–2020
Targets
Iron: To reduce capacity
by 48 million tonnes
Steel: To reduce capacity
by 48 million tonnes
N/A
Results
As of 2011:
Iron: reduced 31.92
million tonnes
Steel: reduced 28.46
million tonnes
Iron: reduced 117 million
tonnes
Steel: reduced 78 million
tonnes
N/A
Trends of SMEs &
Forecast
Local SMEs keep expanding and continue to increase
output
Difficult to control SMEs because they remain
unorganised
Credit crunches in local banks will lead to
successive bankruptcies
Source: CISA

13
Chinese Iron and Steel Industry – Production Regions and
Characteristics
Northern and Eastern China Predominant Production
Regions, Accounting for Almost 70% of Overall Output
Northern China, centred on Hebei Province, and Eastern China, represented by
Jiangsu Province and Shanghai, are outstanding in terms of steel output.
Combined, they account for roughly 66% of overall output, highlighting the
concentration of the industry. By province, Hebei Province holds the largest
share of 25.34%, with its output standing at 165.54 million tonnes. It is followed
by Jiangsu Province (10.08%, 65.85 million tonnes), Liaoning Province (8.29%,
54.20 million tonnes), and Shandong Province (7.56%, 49.40 million tonnes).
Looking at the top five production regions, their combined share on a volume
basis has increased from 20% in 2000 to more than 55% as of end-2014 (latest
statistics), indicating a trend towards concentration.
Output Capacity by Region
Region
Output Capacity
(10,000 tonnes)
Share (%)
Northern China 23,554 36.05
Eastern China 20,145 30.84
Northeast China 6,760 10.35
Southern China 8,300 12.71
Southwest China 4,175 6.40
Northwest China 2,390 3.65
Total 65,324 100.00
Source: CEInet
0
20,000
40,000
60,000
80,000
100,000
10,000tonnes
China: Crude Steel Output by Region
Hebei Liaoning Jiangsu Shandong Shanxi Nationwide

14
Characteristics
Continued Shift of Facilities Towards Riverside and Coastal
Regions
In addition to the opening of new production plants in coastal regions as
mentioned above, there has been a steady shift towards and expansion of
facilities in riverside and coastal regions. As of end-2014, riverside and coastal
regions recorded a combined crude steel output of 121.7 million tonnes,
accounting for 17.4% of the national total (refer to Table A). Moreover, adding
up the 95 million tonnes of output by production plants that had been
approved to move to riverside and coastal regions by September 2009 (refer to
Table B), it is estimated that at least 30% of national output will be shifted
towards riverside and coastal regions in the future.
Table A
Company
Output Capacity
(10,000 tonnes)
Port
Jiangsu Shagang 2,200 Jiangsu Port along the Yangtze River
Baosteel 2,000 Pudong Port
Wuhan Iron & Steel 1,700 Jiangsu Port along the Yangtze River
Ma’anshan Iron & Steel (Magang) 1,700 Jiangsu Port along the Yangtze River
Shougang Jingtang United Iron & Steel 1,000 Caofeidian Port
Rizhao Steel 1,000 Port of Rizhao
Nanjing Steel 700 Jiangsu Port along the Yangtze River
Anshan Iron & Steel 600 Port of Bayuquan
Handan Zongheng Iron & Steel 560 Huanghua Port
Ningbo Iron & Steel 400 Port of Ningbo
Tangshan Heavy Plate 160 Jingtang Seaport
Tangshan Delong Steel 150 Jingtang Seaport
Total 12,170

15
Table B
Company Capacity of Facilities to be Shifted Port
Tangshan Guofeng Iron & Steel 3,000 Caofeidian Port
Baosteel 2,000 Zhanjiang Port
Xinjing, Puyang, Wenfeng 1,500 Huanghua Port
Nanjing Steel 1,000 Port of Lianyungang
Shandong Iron & Steel 1,000 Port of Rizhao
Wuhan Iron & Steel 1,000 Port of Fangcheng
China Minmetals 300 Port of Yingkou
Total 9,500
Source: askci.com

16
Characteristics
Map of China’s Iron and Steel Manufacturing Sites

17
Chinese Iron and Steel Industry – Finding the Way Out: Minor
Boost of Domestic Demand and Exports
Export Excess Output: Total Capacity 1.05 Billion Tonnes, Domestic Demand
0.52 Billion Tonnes
As shown in the graph below, the overall domestic demand for crude steel was
roughly 520 million tonnes (tentative calculation) in 2015. According to the
National Bureau of Statistics, the total nationwide output capacity was
estimated to reach around 1.05 billion tonnes in 2015. The actual effective
output was 840 million tonnes based on an assumed operation rate of 80%.
Based on simple calculation (excluding inventory), roughly 39% of output was
surplus, requiring disposal through exports and other means. Steel material
exports increased by 50.7% YoY to reach 93.926 million tonnes in FY2014. As
per CEInet data, the accumulated export volume of steel materials hit 112
million as of end-December FY2015.
Source: UZABASE

18
Driving Factors of Domestic Demand for Steel (2015)
Major
Industries
Status-quo
Demand Forecast (10,000
tonnes)
Calculation
(10,000 tonnes)
Real Estate
Investment in real estate
industry: CNY 1.06 billion (2015)
Total area sold: 1.24–1.27 billion
sq. metres (2015)
New areas of construction:
1.78–1.82 billion sq. metres
(2015)
New demand: 8,900–11,830
(take 10,500)
Indemnificatory residences:
2,200
Renovation of rural
residences:
1,830
Total: 14,530
New demand: 8,900–11,830
(1.78–1.82 billion sq. metres (new areas of
construction) ｘ50–65 kg)
Indemnificatory residences: 2,200
(60 sq. metresｘ50 kg/sq. metresｘ7.40
million households)
Renovation of rural residences: 1,830
(100 sq. metresｘ50kg/sq. metresｘ3.66
million households)
Automobiles
(60–70% of
vehicle)
Automobile manufacturing
accounts for 6–7% of overall
steel demand in China, relatively
low compared to OECD
countries (10%)
For manufacturing: 4,130
For repair: 2,400
Total: 6,530
(as per the Ministry of
Public Security of the PRC)
For manufacturing: 4,130
(refer to Table A below)
For repair: 2,400
0.155 (0.15–0.16, incl. parts) ｘ 154 million
vehicles (ownership as of 2014)
Railway
Investment in railway
construction: CNY 800 billion
(2015)
Total distance constructed in
2015: 8,000 km
(CISA forecast: CNY 650 billion)
2,200 33,300 tonnes of steel materials consumed
in CNY 100 million worth of investment
CNY 650 million ｘ 33,300 tonnes/CNY
million
Private Airports
25 airports under construction
in 2015, equivalent to CNY 300
billion in value
300 Around 10,000 tonnes of steel materials
consumed in CNY 1 billion worth of
investment
Public Transport
Facilities
(rails, stations,
and relevant
facilities)
Total distance of rail constructed
in 2015: 1,000 km
3,200 Relevant facilities: 3,200
Around 10,000 tonnes of steel materials
consumed in 1 km of rail (incl. stations and
relevant facilities) that is worth CNY 100
million in value
Road
Construction
50,000 km of road constructed
in 2015
(motorway: 23,300 km)
1,600 Motorway: 1,000
(23,300 km ｘ 450 kg/km)
General road: 600
(26,700 km ｘ 450 kg/km)/2
(half the amount of steel materials used for
motorway construction)
Machinery
Manufacturing
(engineering
equipment,
heavy machines
for mining,
agricultural
industries)
140 million tonnes of steel
materials consumed in
machinery manufacturing
industry in 2014
14,000 Levelling off from the 2014 levels
Shipbuilding
Completed: 36.29 million tonnes
(-16.3%)
1,400 Levelling off from the 2014 levels

19
New orders placed: 51.02
million tonnes (-25.9%)
Orders in-hand:
14.97 million tonnes (+15.1%)
Household
Appliances
Washing machines:
72.00 million units
Air conditioners: 160 million
units
Refrigerators: 120 million units
8,310 Washing machines: 1,512
(72.00 million units ｘ 0.21 kg/unit)
Air conditioners: 4,800
(160.00 million units ｘ 0.30 kg/unit)
Refrigerators: 4,080
(120.00 million units ｘ0.34 kg/unit) / 0.80
Total 520.70 million tonnes
Table A: Estimated Number of Automobiles Sold by Vehicle Type and Steel Consumption (2015)
Vehicle Type
Passenger Vehicles
Commercial
Vehicles
Light
Automobile
SUV MPV
Station
Wagon
Trucks Bus
Number of Vehicles Sold
(10,000 units; estimate)
1,251 510 258 106 323 65
YoY Growth (%) 1 25 35 -20 1.3 6.5
Steel Consumption (tonne/unit) 1.16 1.55 1.55 0.88 3.42 4.49
Steel Consumption (10,000 tonnes/vehicle
type)
1,451.16 790.5 399.9 93.28 1,104.7 291.85
Total Consumption (10,000 tonnes) 4,131.40

20
Chinese Iron and Steel Industry – Elimination of Overcapacity
by 2020
Gap Between Excess Output Capacity and Demand for Crude
Steel to be Filled by 2020
According to OECD data, the excess output capacity (output capacity - apparent
consumption) of crude steel was estimated to be 336–425 million tonnes in
China as of 2014, accounting for roughly 50–60% of total global overcapacity.
Furthermore, because the expansion in supply has outpaced domestic demand,
the balance between supply and demand will continue to deteriorate in China.
In response to such trends, the Chinese government has pledged to reduce
steel production by 100–150 million tonnes over a five-year period starting
from 2015. As shown in the graph below, it is believed that the overcapacity
issue will not be solved until 2020.
(The calculation is based on opinions from industry specialists which state that
by 2020, output capacity will be decreasing at the speed of 100 million tonnes
per annum; apparent consumption will increase to 1.0 billion tonnes; and the
facility operation rate will remain at the current industry average of 80%.)
-10,000
0
10,000
20,000
30,000
40,000
50,000
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
China: Gap Between Supply and Demand (million tonnes)
Output Capacity of Crude Steel Apparent Consumption Gap

21
64.0%
66.0%
68.0%
70.0%
72.0%
74.0%
76.0%
78.0%
80.0%
82.0%
84.0%
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
China: Crude Steel Manufacturing Industry (million tonnes)
Production Volume Output Capacity Apparent Consumption Operation Rate

22
Chinese Iron and Steel Industry – Involvement in Global
Merger Trends
Large-Scale Mergers Expected to Take Place from 2015
Onward
Looking back on the past four rounds of global mergers in the iron and steel
industry, it is a common phenomenon that mergers and reorganisation take
place when the industry is exposed to severe circumstances, with the
subsequently occurring mergers and reorganisation activities in turn leading to
recovery in the industry.
At present, the Chinese iron and steel industry is struggling with a number of
factors, most notably overcapacity issues. Moreover, the industry has a low
concentration compared to OECD countries, and players operate with negligible
profits. Such an environment is believed to be conducive for mergers and
reorganisation activity in the industry.
Mergers in Iron and Steel Industry
Source: Uzabase

23
Chinese Iron and Steel Industry –
Speculations of Local Governments and Enterprises
Various Speculations Among Enterprises and Local
Governments
A number of companies in the iron and steel industry have been looking toward
mergers and reorganisation as a way to break out of the adverse industry
circumstances. However, it appears difficult not only for SMEs but also for
major players in the industry to realise such merger plans.
As of end-2014, there are six mega manufacturers in the Chinese iron and steel
manufacturing industry, each of which boasts an annual output exceeding 30
million tonnes. These are Hebei Iron & Steel (CHN), Baosteel (CHN), Jiangsu
Shagang (CHN), Anshan Iron & Steel (CHN), Wuhan Iron & Steel (CHN), and
Shougang (CHN). In comparison, there are 21 manufacturers that each have an
annual output of 10–20 million tonnes. Altogether, their output (approx. 0.82
billion tonnes) accounted for 72% of the national total (1.14 billion tonnes).
One of Beijing’s principle guidelines for the iron and steel industry is in spurring
the consolidation and reorganisation of manufacturers. However, such plans
have encountered numerous setbacks because local governments—a unique
political feature of China—are reluctant to carry through, owing to financial
concerns. The early-stage failure of the merger between Baosteel and Wuhan
Iron & Steel was another factor discouraging the progress of industry
consolidation and reorganisation.
In addition, policies stipulated by the central government often do not
penetrate to regional levels. This is because regional governments generally
offer local entities separate favourable policies (for example, in regards to
corporate taxation) based on their “locality”, and many aspects of the process
lack transparency.

24
Chinese Iron and Steel Industry - Industry Players
Merger Plans Carried Out Behind the Scenes; However,
Successful Deals Remain to be Seen
The basic form of mergers and acquisitions is that a major manufacturer either
forms another industry major or pulls SMEs under its umbrella. However,
because major manufacturers are state-run companies, M&As require approval
from provincial authorities, which increases the likelihood that the deal will be
called to a halt. This issue requires further attention going forward. Find below
an overview of current merger deals—including buyers and sellers—based on
publicly disclosed information.
In particular, the movements of steel manufacturers in Northern China (i.e.
Hebei Iron & Steel, Shougang) and Eastern China (i.e. Baosteel, Jiangsu Shagang,
Wuhan Iron & Steel, Ningbo Iron & Steel) have been attracting attention. Note
that the merger between Baosteel and Wuhan Iron & Steel has been in an
impasse. If the deal works out, however, it will create a mega manufacturer
with an annual output capacity of over 100 million tonnes, and will likely
expedite the progress of other mergers in the industry as well.
Aberrant Operation Rate Indicating Chinese Major
Manufacturers’ Intentions: No Output Reduction Despite
Gloomy Sales
As shown in the graph below, each major manufacturer exhibits an abnormally
high operation rate of more than 80%. However, in spite of the frustrating
market, each company has been playing chicken in a struggle to survive, with
the intention of maintaining high production rates until their competitors
collapse. This is another factor contributing to the extraordinary operation rate.
According to a survey conducted by mysteel.com, a website specialising in iron
and steel, the average debt ratio of the 67 steel manufacturers surveyed in
2014 reached a dangerous level of 68.35%, and multiple companies have
exceeded 100% in terms of debt ratio.

25
Chinese Iron and Steel Industry – Industry Players
Leading Chinese Iron and Steel Manufacturers (2014)
Company
Corporate
Type
Annual
Crude
Steel
Output
Capacity
(10,000
tonnes)
Annual
Crude
Steel
Output
(10,000
tonnes)
Opera
tion
Rate
(%)
Debt
Ratio
(%)
Specialised
Industries
& Products
Primary
Sales
Regions
Possible
Merger
& Deal
Targets
Major
Trade
Partners
(JPN)
Hebei Iron
& Steel
State-run 5000 4709 94.18 73.42
Railway vehicles
and automobiles
Spring steel
Northern
China
※Small
enterprise
s
Shougang
Mitsui
O.S.K.
Lines
Baosteel State-run
5500※
Estimate
4335 78.8% 45.7%
Automobiles and
automotive parts
Cold- and hot-
rolled steel
sheets
Aluminium steel
Nationwid
e
Wuhan
Iron &
Steel,
Ningbo
Iron &
Steel,
Jiangsu
Shagang
Mitsui &
Co.
Jiangsu
Shagang
State-run 3920 3533 90.1% 41.0%
Construction
Carbon fibre bar
steel
Eastern
China
Huaigang
Special
Steel
Sojitz
Anshan
Iron &
Steel
State-run 4500 3435 76.3% 47.2%
Automobiles and
automotive parts
Cold- and hot-
rolled steel
sheets
Northeast
China
Benxi Steel NYK Line
Wuhan
Iron &
Steel
State-run 3350 3305 98.7% 61.9%
Automobiles and
automotive parts
Cold- and hot-
rolling steel
sheets
Central
China
Baosteel
Nippon
Steel &
Sumitomo
Metal
Shougang State-run
4000※
Estimate
3078 77.0% 61.1%
Automobiles and
automotive parts
Cold- and hot-
rolled steel
sheets
Northern
China
Hebei Iron
& Steel
Toyota
Motor
Shandong
Iron &
Steel
State-run 3000 2334 77.8% 67.2%
Automobiles,
petroleum,
railway,
construction,
shipbuilding,
household
appliances
Cold- and hot-
rolled steel
sheets, oil well
pipes
Eastern
China
Rizhao
Steel
Ma'anshan
Iron &
Steel
(Magang)
State-run 2050 1890 92.2% 62.2%
Construction
materials
Wire rods, rebars
Eastern
China

26
Bohai
Steel
State-run 2400 1849 77.0% N/A
Construction, oil
well pipes
Northern
China
Hanwa
Benxi Steel State-run 2400 1626 67.8% 67.7%
Military relevant,
marine, railway
transport
Special steel,
rails
Northeast
China
Anshan
Iron &
Steel,
Panzhihua
Iron &
Steel
Mitsubishi
Heavy
Industries
Fangda
Special
Steel
State-run 1500 1364 90.9% 65.5%
Construction
materials/rebars
Automobiles/spri
ng steel,
Cold- and hot-
rolled steel
sheets
Eastern
China
Xinyu Iron
& Steel
Baogang State-run
1500※Esti
mate
1072 71.5% 80.5%
Railway rails,
rare earth base
alloy
Northern
China
Mitsubis
hi
Hitachi
Valin Steel State-run 2200 1538 69.9% 79.9%
Shipbuilding,
automobile,
large machinery
Steel sheets,
special steel, oil
well pipes
Central
and
Southern
China
Shaogang
Songshan,
Wuhan
Iron &
Steel
Mitsubis
hi Fuso
Truck
and Bus,
Isuzu
Motors
Anyang
Iron &
Steel
State-run 1000 1089 108.9% 76.3%
National
defence,
airplanes, traffic,
shipbuilding
related, oil well
pipes,
construction
Central
and
Southern
China
Wuyang
Mining
Hebei
Jingye
Group
Private 1200 1054 87.8% 87.8%
Shipbuilding,
road
construction,
construction
Northern
China
Hohhot
Steel
Jianlong
Group
Private 1735 1526 88.0% N/A
Automobiles and
machinery
manufacturing
Northern
China
Haixin
Iron &
Steel
Mitsui &
Co.
Rizhao
Steel
Private 1350 1140 84.4% 88.3%
Construction for
civil and
industrial use,
railway bridges,
public facilities,
nuclear facilities
Wire rods,
special steel
Eastern
China
Shandong
Iron &
Steel
Jiuquan
Iron &
Steel
State-run 1000 1034 103.4% N/A
Automobiles,
shipbuilding,
construction
Steel sheets,
special steel
Northwest
China
Mitsubis
hi
Hitachi
Power
Systems
Taiyuan
Iron &
Steel
State-run 1500 1072 71.5% 68.9%
Automobiles,
military relevant
Special stainless
steel
Northern
China
Xishan
Coal
Electricity
Nippon
Yakin
Kogyo
Total 49105 40983 83.5% 66.1%

27
Chinese Iron and Steel Industry – Each Company Accelerating
Entries into Overseas Markets Despite Anti-dumping
Measures
Each Country Slapping Anti-dumping Duties on China to
Protect Domestic Industries; Chinese Players Establishing
Factories Overseas
Faced with low-priced Chinese exports, many countries have levied anti-
dumping taxes in an attempt to protect their own domestic enterprises. To
tackle the situation, Chinese industry majors have turned to establishing on-site
factories in overseas locations.

28
Anti-dumping Probes and Duties Against Chinese Steel Exports
Region Country Target Products
Investigation Start
Date
Implementation
Date
Tax Rate
Southeast
Asia
Malaysia
Stranded wires 5 January 2014 12.39%, 5 years
Reinforced Concrete (RC) 1 September 2014 N/A
Hot-rolled coils 17 October 2014 1 February 2015
14.87–29.37%, 120
days
Hot-rolled steel sheets 14 December 2014 23.93%, 200 days
Reinforced Concrete (RC) 1 January 2015 N/A
Hot-rolled coils,
checkered plates, pickled
coils
1 February 2015 N/A
Cold-rolled stainless steel
sheets
1 April 2015 N/A
Mid- to thick steel plates 1 July 2015 3 years
Coloured steel plates 1 September 2015 N/A
Pre-coated/coloured coils 1 April 2015 4 January 2016 52.10%, 5 years
Cold-rolled steel sheets 1 August 2015 3 January 2016
4.58–23.78%, 120
days
Thailand
High carbon wire rods 17 May 2014
5.17–33.98%,
5 years
Hot-rolled non-alloy steel
flat products
30 January 2014 1 January 2015 N/A
Low carbon wire rods 1 January 2015 1 September 2015 N/A
Clad materials 1 February 2015 N/A
Hot-rolled coils 1 May 2015 3.45–128%, 5 years
Stainless pipes 1 September 2015 Not disclosed
Indonesia
Ferrous and non-alloy
steel sheet
26 May 2014 3 years
Shaped steel (H, I) 10 October 2014 3 years
Irregularly wound hot-
rolled bars and rods
1 January 2015 N/A
Cold-rolled stainless steel 22 December 2014 N/A
Shaped steel (H, I) 1 February 2015 3 years
Iron and steel 1 June 2015 20%
Wire rods 1 August 2015 3 years
Vietnam
(coils and/or sheets)
7 October 2014 4.64–6.87%
Alloy billets 1 October 2015 10%

29
Investigation Start
Date
Implementation
Date
Tax Rate
Asia
South
Korea
H-shaped steel 29 December 2014 1 May 2015
28.23–32.72%, 5
years
Taiwan Cold-rolled stainless steel 15 August 2013 5 March 2014 38.11%, 5 years
India
sheet (400 series)
19 September 2014 N/A
Ferrous, alloy, and non-
alloy (non-iron casting and
stainless) seamless steel
pipes and hollow
structural sections
11 March 2014
2.5 years (1st year
25%, 2nd year 15%,
3rd year (6-month)
5%)
Hot-rolled stainless steel
sheets (304 series)
11 March 2014 1 June 2015 5 years
Cold-rolled Cr stainless
plate steel (400 series)
1 March 2015 N/A
Seamless steel pipes and
hollow structural sections
1 July 2015 N/A
Iron and steel 1 September 2015 20%
Hot-rolled coil 1 September 2015 20%
Hot-rolled plate steel, mid
to thick plate
1 December 2015 Not disclosed
Cold-rolled stainless plate
steel
1 December 2015 5 years
Pakistan
Billets 1 August 2015 N/A
Cold-rolled plate steel 1 August 2015 N/A
Zinc-galvanised plate steel 1 August 2015 N/A
Wires 1 October 2015 N/A
Iran Steel materials 1 February 2015 10–20%
Investigation Start
Date
Implementation
Date
Tax Rate
Oceania Australia
Hot-rolled plate steel 1 March 2015 1 August 2015 N/A
Steel bars 1 March 2015 1 December 2015 N/A
Welding tubes 1 March 2015 1 April 2015 N/A
Zinc-galvanised steel and
alloy-coated steel sheets
1 June 2015 N/A
Deep drawn stainless steel
sinks
1 December 2015 N/A
Deformed bar steel 1 December 2015 N/A
Rod in coil 8 February 2016 N/A

30
Investigation
Start Date
Implementation
Date
Tax Rate
Africa
Egypt Deformed bar steel 14 October 2014 1 May 2015
CIF7.3%
(tax rate < EGP 290/tonne),
3 years
Morocco
Cold-rolled steel
sheets and clad plates
11 June 2014 N/A
Guatemala
Zinc-galvanised steel
sheets
1 January 2015 N/A
24 March 2014 N/A
Peru Hot-rolled steel pipes 1 May 2015 N/A
Zambia Iron and steel 1 July 2015 N/A
South Africa Iron and steel 1 September 2015 10%
Algeria
Deformed bar steel,
wire rods, steel pipes,
billets
1 October 2015 30%
Investigation
Start Date
Implementation
Date
Tax Rate
South
America
Brazil
Electric steel 5 July 2014 USD 132.5–567.16/tonne
Seamless steel pipes 31 October 2014 USD 908.59/tonne, 5 years
Thick clad plate steel
and boron steel
plates
(mid to thick)
19 December 2014 N/A
Coated flat steel 1 January 2015 N/A
Boron steel plates
(thick)
Seamless carbon fibre
steel pipes
Seamless steel pipes 1 December 2015 N/A
Stainless sinks 1 May 2015 N/A
Hot-rolled steel
sheets
1 June 2015 72.16–78.96%
Cold-rolled steel
sheets
24 April 2014 N/A
Columbia
Hot-rolled wire rods 1 January 2015 N/A
Hot-rolled galvanised
steel sheet
6 March 2014
USD 824.57/tonne; when
this price exceeds FOB price,
take the price difference.
Wire rods 28 March 2014 N/A
Hot-rolled wire rods 1 July 2015 N/A
Hot-rolled alloy wire
rods, bar steel
1 October 2015 N/A
5 January 2016 Period extension
Argentina Duct affiliates
1 October 2015 N/A
1 November 2015 N/A
Dominica Hot-rolled bar steel 1 January 2015 6 months

31
Investigation
Start Date
Implementation
Date
Tax Rate
North
America
USA
Electric Steel 25 September 2014 159.21%
Non-oriented electromagnectic
steel sheets
6 November 2014 407.52%
Carbon wire rods 15 December 2014 106.19–110.25%
Non-casting duct affiliates 1 January 2015 75.50%
Oil well pipes 1 April 2015 N/A
Steel piles 1 April 2015 N/A
Nail-free steel shelves 1 March 2015 N/A
Deep drawn stainless steel
sinks
1 May 2015 N/A
Steel strands for prestressed
concrete structures
(prestressed concrete steel)
1 July 2015 N/A
Zinc-galvanised plate steel 1 June 2015 N/A
Nail-free steel shelves 1 August 2015 N/A
Cold-rolled steel sheets 1 August 2015 1 September 2015 N/A
Steel piles 1 September 2015 N/A
Iron bars 1 October 2015 N/A
Wire hangers 1 November 2015 N/A
Rebars 1 November 2015 N/A
Erosion-resistant steel 1 December 2015 255.80%
Carbon steel wires and bars 1 November 2015 N/A
Seamless oil well pipes, etc. 1 December 2015 N/A
Reinforced concrete (RC) 8 February 2016 N/A
Mexico
Seamless pipes 8 January 2014
USD 1569.92/tonne,
additional charge
Carbon steel welded joint 1 July 2015 5 year extension
Wire rods
1 September
2015
N/A
Wire rods 1 August 2015 N/A
Iron and steel 1 September 2015
Adjustment on import
tax
Concrete nails 1 November 2015 N/A
Hot-rolled steel sheets 1 December 2015 N/A
Cold-rolled steel sheets
1 December
2015
N/A
Wire rods 1 December 2015 N/A
Zinc-alloy door knobs 1 December 2015 N/A

32
Investigation
Start Date
Implementation
Date
Tax Rate
Europe
EU
Oil well pipes 31 March 2014 N/A
Electric steel 14 August 2014 1 October 2015 N/A
Deformed bar steel 1 April 2015 N/A
Fatigue-resistant concrete bar steel 1 April 2015 5 January 2016
9.2–13.0%,
6 months
Silicon steel 1 May 2015 28.70%
Cold-rolled steel sheets 1 May 2015 8 February 2016 6 months
Steel strands for pre-stressed concrete
structures (pre-stressed concrete steel)
1 June 2015 N/A
Stainless flat steel 1 August 2015 N/A
Steel pipe parts 1 October 2015 1 October 2015 N/A
Castable rebars and joints 1 November 2015 N/A
Wire rods 1 November 2015 N/A
Thick steel plate of non-alloy and other
alloy
1 February 2016 N/A
Seamless pipes 1 February 2016 N/A
EEC
Stainless cutlery 1 January 2015 15.56–74%
Cold-rolled stainless steel sheets 1 March 2015 10.9–25.2%
Ukraine
Seamless pipes and high-pressure pump
pipes
1 March 2015 N/A
Seamless stainless pipes 29 November 2014 41.07%, 5 years
Turkey
Hot-rolled coils 1 January 2015 N/A
Cold-rolled stainless steel 1 August 2015 N/A

33
Overseas Entries of Leading Chinese Manufacturers
Region Company
Country
Entered
Year of
Entry
Investment Size
Output
Capacity
Asia
Rizhao Steel
Myanmar, the
Philippines
2015 Established an office N/A
Anshan Iron & Steel Indonesia 2015 CNY 800 million
5 million
tonnes
Nanjing Iron & Steel Indonesia 2014 CNY 1.3 billion
1 million
tonnes
Anshan Iron & Steel
Japan, South
Korea
2009
Signed a long-term agreement on
marine transport of iron ores with STX
(KOR) and Mitsui O.S.K. Lines (JPN)
N/A
Europe
Bohai Steel
British Virgin
Islands
2015
Operating international trade and
commercial consulting services of bulk
commodities like iron ores
N/A
Ma'anshan Iron &
Steel
France 2014
Acquired SAS Valdunes (FRA) for EUR 13
million
N/A
Hebei Iron & Steel Switzerland 2014
Increased its stock share in Duferco
DITH (CHE) to 51%
N/A
Shandong Iron &
Steel
Tangier,
Morocco
2014 USD 150 million
0.25 million
tonnes
Africa
Xinxing Ductile Iron
Pipes
Ethiopia 2015
Procured 100,000 tonnes of ductile cast
iron pipes
3 million
tonnes
Hebei Iron & Steel South Africa 2014
Owned 270 million tonnes of high-
quality iron resource, 200 million
tonnes of copper resource, and world
third largest vermiculite ore reserve
5 million
tonnes
Shandong Iron &
Steel
Sierra Leone 2012 USD 1.5 billion
6.77 million
tonnes
Wuhan Iron & Steel Liberia 2010 USD 68.46 million
10 million
tonnes
South
America
Wuhan Iron & Steel Brazil 2010
Jointly established a factory with Prumo
Logistica (BRA; formerly known as LLX
Logistica) by investing USD 5 billion
N/A
Wuhan Iron & Steel Brazil 2009
Acquired MMX from EBX Group (BRA)
for USD 400 million
N/A
Oceania
Shandong Iron &
Steel
Australia 2015 CNY 18.0 billion N/A
Anshan Iron & Steel Australia 2013
Increased its stock share in Karara Iron
Ore Mine (AUS) to 52.16%
N/A
Baosteel Australia 2012
Iron ore reserve reached 5.2 billion
tonnes
1.50 million
tonnes
Pangang Group
Vanadium Titanium
& Resources
Australia 2011
Iron ore reserve reached 3.67 billion
tonnes
10 million
tonnes
Anshan Iron & Steel Australia 2009
Increased its stock share in Gindalbie
Metals (AUS) to 36.28%, becoming the
largest shareholder of this company
N/A
North
America
Tianjin Seamless
Steel Tube & Pipe
USA 2014 USD 1.0 billion N/A

34
North
America
Hebei Iron & Steel Canada 2012 CNY 1.2 billion
4.80 million
tonnes
Anshan Iron & Steel USA 2010
Four rebar manufacturing plants and
one electric steel factory
N/A

35
Chinese Iron and Steel Industry – Steel Material Prices
Dropping, Likely to Plunge Even Faster
Steel Material Prices on Continuous Downtrend; Market
Deteriorating Since Early 2015
Compared to end-2012, the prices of major steel materials dived to lower than
half of those of October 2015. Given that concrete policies to back the Chinese
construction industry have yet to be finalised, these prices are highly expected
to plunge further.
1,000.00
1,200.00
1,400.00
1,600.00
1,800.00
2,000.00
2,200.00
2,400.00
2,600.00
2,800.00
3,000.00
Iron Scrap (Raw Material)
Beijing Dalian Guangzhou Shanghai Xi’an
1,000.00
1,500.00
2,000.00
2,500.00
3,000.00
3,500.00
Crude Steel/Raw Iron (L8–10)
Kunming Guiyang Longyan Anyang Yicheng Tangshan
Wu’an Linyi Zibo Ma’anshan Harbin

36
1,000.00
1,500.00
2,000.00
2,500.00
3,000.00
3,500.00
4,000.00
Billet (Q235)
Jiangsu Shandong Tangshan Shanxi
1,500.00
2,000.00
2,500.00
3,000.00
3,500.00
4,000.00
4,500.00
Steel Rebar (HRB400 20mm, Nationwide)
1,500.00
2,000.00
2,500.00
3,000.00
3,500.00
4,000.00
4,500.00
Wire Rod (High Tensile 6.5)
Chongqing Wuhan Shenyang Shanghai Guangzhou Tianjin Beijing

37
1,500.00
2,000.00
2,500.00
3,000.00
3,500.00
4,000.00
4,500.00
Hot-rolled Steel Sheet (4.75mm Coil)
#REF! Wuhan Shenyang Shanghai Guangzhou Tianjin Beijing
2,000.00
2,500.00
3,000.00
3,500.00
4,000.00
4,500.00
5,000.00
5,500.00
Cold-Rolled Steel Sheet (1.0mm Coil)
Wuhan Chongqing Shenyang Shanghai Guangzhou Tianjin Beijing
1,500.00
2,000.00
2,500.00
3,000.00
3,500.00
4,000.00
4,500.00
Mid to Thick Plate Steel (20mm)
Chongqing Wuhan Shenyang Shanghai
Guangzhou Tianjin Beijing

38
Chinese Iron and Steel Industry – A Harsh Winter for the
Industry: From the Perspective of Revenue Model
Narrow Margin with High Turnover No Longer Attainable for
Chinese Steel Manufacturers
As demonstrated in the graph “Profit Model Calculation (Tentative)” below, the
iron and steel manufacturing industry is already trapped in a negative business
cycle, in which manufacturers cannot gain profits even if they manage to sell
their products. A variety of products ranging from pig iron and billets to wire
rods and plate steel have seen manufacturing costs exceed selling price. In
particular, steel rebar, which is mostly used in the real estate construction
industry, is in extreme trouble with a unit price of CNY 350–400 per tonne.
Moreover, given the forthcoming bubble burst in the real estate industry, as
well as the increase in the number of vacant properties in Tier 2 and 3 cities,
where real estate sales have been unfavourable, it can be said that a recovery in
price is unlikely due to extremely low demand.
-500
-400
-300
-200
-100
0
100
200
300
May/14
Jun/14
Jul/14
Aug/14
Sep/14
Oct/14
Nov/14
Dec/14
Jan/15
Feb/15
Mar/15
Apr/15
May/15
Jun/15
Jul/15
Aug/15
Sep/15
Oct/15
Nov/15
Raw Iron Billet

39
Basic Profit Model
Raw iron cost =
[Iron ore price on a dehydrated base / Water (0.92) ∗ Iron ore blended (1.6) + Coke price ∗ Coke blended (0.5)]
Process cost
Crude steel cost =
[Raw iron cost ∗ Raw iron blended (0.96) + Iron scrap ∗ Iron scrap blended (0.15)]
Crude steel process cost (0.82)
-500
-400
-300
-200
-100
0
100
200 May/14
Jun/14
Jul/14
Aug/14
Sep/14
Oct/14
Nov/14
Dec/14
Jan/15
Feb/15
Mar/15
Apr/15
May/15
Jun/15
Jul/15
Aug/15
Sep/15
Oct/15
Nov/15
Rebar High speed wire rods
-1000
-800
-600
-400
-200
0
200
400
May/14
Jun/14
Jul/14
Aug/14
Sep/14
Oct/14
Nov/14
Dec/14
Jan/15
Feb/15
Mar/15
Apr/15
May/15
Jun/15
Jul/15
Aug/15
Sep/15
Oct/15
Nov/15
Hot-rolled steel Cold-rolled steel Mid to thick plate steel

40
Chinese Iron and Steel Industry – Eastern China: Product Unit
Price Relatively High, Expected to Recover Soon
Market in Eastern China Expected to Recover Sooner than
Northern China
In regard to regional price difference, steel products—for example rebar and
hot-rolled steel sheets—in Northern China (Beijing), where the overcapacity
situation is more severe, have a lower unit price compared to Eastern China
(Shanghai). The overall recovery for the Northern Chinese market is also slow.
Note: Price difference = Price (Shanghai) - Price (Beijing)
-200
-100
0
100
200
300
400
500
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Price difference of rebar Price difference of hot-rolled steel sheets

41
Chinese Iron and Steel Industry – Steel Material Exports
Increasing, While Imports Sluggish
High-End Market Demand Highly Dependent on Imports,
However Some Enterprises Are Introducing High-End
Production Facilities
Currently, some high-end markets in China (e.g. shape memory alloy and
automotive security components) are forced to rely on imports for steel
material.
As a result, some industry majors have been introducing production facilities for
such materials from overseas through large-scale investment. It is forecast that
from 2013 onward, exports will continue to expand, while imports will level off
until a stable domestic supply of such materials is achieved.
Source: CEInet
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
USD10,000
Imports and Exports of Steel Materials
Imports Exports

42
Looking Ahead: Future Trends
Industry players will likely focus more on overseas consumption than domestic
demand, and favourable government policies should spur companies to
increase the scope of their exports through expansion into global markets.
Stricter local regulations and the subsequent increase in M&A activity will see
the emergence of mega manufacturer groups, each with an annual capacity of
more than 100 million tonnes. These mega manufacturers will have a focus on
Northern China, Eastern China, and Southern China, respectively.
There is also a need for structural reform, whereby China must reduce its
dependence on the construction industry, which currently generates almost
60% of demand for steel materials, and instead look toward development of
high-end steel materials used in industries such as automotive security
components, aerospace, and nuclear facilities, with the aim of achieving a
stable domestic supply of such materials. (Some observers may argue that what
China lacks is not the technology and facilities required for these materials, but
rather proper management processes).
Finally, the government must implement price controls for the steel materials
industry. The government should actively employ itself in the pricing system,
aiming to reform the current regional price forming mechanism and establish a
new one that ensures nationwide price stability.
Source: by UZABASE

43
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+81-3-4574-6552
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