The document summarizes research on China's steel industry from 2004-2008 and forecasts production levels through 2013. It analyzes steel production data from 2004-2008 using two methods: ordinary least squares regression and a weighted average approach. Both methods predict continued growth in steel production through 2013, with the weighted average approach projecting higher levels. The document also ranks the top 10 steel producers for 2008 based on production, revenue, and Google search volume. It forecasts the top 10 producers for 2013, estimating revenue levels based on financial reports and industry reports.

1. Overview of Chinese steel industry
——Empirical analysis based on data from 2004 to 2008
Tom. Lu
Nov. 2009
ECNU

2. Briefing: About the project
• It is very confusing to enter a field – 1. State Statistics Bureau
when you’re not familiar with, so (providing data from 2004-
when finding the necessary data, I 2007)
think we can follow the next – 2. WSD, WSA, MEPS, My
procedures: Steel, etc.
– 1. State Statistics Bureau (Not – 3. EMIS, 东北证券，国研网
always reliable in China) ,CNKI (ECNU’s pay-database)
– 2. NGOs or Industry – 4. Google, Baidu, Bing, Yahoo!
Associations (more credible) • Detailed sources will be listed
– 3. Pay-database, pay- when mentioned in the next.
consultant company reports.
– 4. Free Google, Baidu, etc.
• My research data sources are
listed as following:

3. Contents
• Part 1 Steel production review and forecast
– Steel production review 04-08
– Forecast of the next 5 yrs (09-13)
– Check point 1
• Part 2 Top 10 producers now and future
– Top 10 of 2008
– Top 10 in 2013
– Check point 2
• Part 3 Outlook of the Steel Industry
– Diamond Model of CHN steel industry
– Development trends of steel industry
– Check point 3

4. Part 1
Steel production review and forecast

5. Steel production review 04-08
Domestic steel production of China (Ton th)
Year Crude Steel
2004 272798
2005 355790
2006 421024
2007 489712
2008 500488
Data Source: EMIS
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6. Forecast of the next 5 yrs (09-13)
• When it comes to the forecast, I can predictions is sometimes
come up with 4 methods: acceptable. That is always costy.
– 1. Set up a model, using existing – 4. Using the Cycle Theory, if the
data to calculate the variants, here industry is regarded as a cyclical
I will use OLS (Ordinary Least industry, using the data from the
Squares) method. last 10 years maybe useful for the
– 2. As domestic steel industry trend of the next 10 years.
growth rate is part of GDP’s and • As the limited source, Delphi method
world steel industry growth rate, is given up. And there is less and
proper weight can be given to weakling evidence showing that steel
either growth rate and that will be industry is a cyclical industry
the wanted growth rate. regarding the economic globalization,
– 3. Using Delphi method to predict, financial crisis, trade liberalization,
delivering forms to professionals, etc. So the 4th way is out of
CEOs, GNR experts, etc, and their consideration.
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7. Forecast 09-13 using OLS
Crude Growth
Year
Steel rate (YOY)
2004 272798 22.70%
2005 355790 30.42%
2006 421024 18.33%
2007 489712 16.31%
2008 500488 2.20%
2009 584753 16.84%
2010 643683.2 10.08%
2011 702613.4 9.16%
2012 761543.6 8.39%
2013 820473.8 7.74%

8. Forecast 09-13 by given weight
Step1: Weight determination Step2: Calculation
Crude Growth
Year
Steel(GDP) rate(YOY)
Growth 2004 272798 22.70%
Year Weight
rate(YOY) 2005 355790 30.42%
2004 22.70% 6.67%
2006 421024 18.33%
2005 30.42% 13.33%
2007 489712 16.31%
2006 18.33% 20.00%
2008 500488 2.20%
2007 16.31% 26.67%
2009 572157.88 14.32%
2008 2.20% 33.33%
2010 654090.89 14.32%
Final Growth Rate: 14.32%
2011 747756.71 14.32%
2012 854835.47 14.32%
2013 977247.9 14.32%

9. Forecast 09-13 by given weight (cont.)
Step2: Calculation
Crude Growth
Year
Steel(GDP) rate(YOY)
2004 272798 22.70%
2005 355790 30.42%
2006 421024 18.33%
2007 489712 16.31%
2008 500488 2.20%
2009 572157.88 14.32%
2010 654090.89 14.32%
2011 747756.71 14.32%
2012 854835.47 14.32%
2013 977247.9 14.32%

10. Check point 1
Growth rate comparison
Year Weight OLS W-O
2009 14.32% 16.84% -2.52%
2010 14.32% 10.08% 4.24%
2011 14.32% 9.16% 5.16%
2012 14.32% 8.39% 5.93%
2013 14.32% 7.74% 6.58%
As we can see, different estimation methods lead to different
results(obviously), the OLS is more “mild” than the Weight, and
Weight is more optimistic. Taking various factors into
consideration, maybe the true result will be just between the
ranges!
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11. Part 2
Top 10 producers now and future
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12. About the Top 10
• The top 10 producers • For Top 10 of 2013, forecast is
sometimes maybe mistaken: needed again. This time the
the Top 10 in production or the method will be:
Top 10 in financial revenue? – 1. Using listed companies’
There are many so-called annual financial report for
ranking lists in the world with study
different results. Here, I will – 2. Consultant surveys and
make a ranking list myself reports for those unlisted
according to the public data. companies’ rating
• For Top 10 of 2008, the list will – The final outcome will be a
be ranked by production, combination of calculation
revenue and Google Trends and rating.
respectively.

13. Top 10 of 2008 (Production ranking)
Production
Ranking Company Chinese Name
08(ton th)
1 BAOSTEEL GROUP CO. 宝钢集团有限公司 35443
HEBEI IRON & STEEL (GROUP)
2 河北钢铁集团 33283.9
CO.
WUHAN IRON & STEEL
3 武汉钢铁集团公司 27733.9
(GROUP) CO.
MAANSHAN IRON & STEEL CO.,
4 鞍山钢铁集团公司 23439.3
LTD.
5 JIANGSU SHAGANG GROUP 江苏沙钢集团 23304.6
SHANDONG IRON & STEEL
6 山东钢铁集团有限公司 21840.8
(GROUP) CO.
MAANSHAN IRON & STEEL
7 马钢(集团)控股有限公司 15039
COM.,LTD.
8 BEIJING SHOUGANG CO., LTD. 首钢总公司 12192.8
9 HUNAN VALIN STEEL CO.,LTD. 湖南华菱钢铁集团有限责任公司 11256.9
BAOTOU IRON & STEEL
10 包头钢铁(集团)有限责任公司 9839
(GROUP) CO.
Data Source:艾凯数据研究中心 BACK TO CONTENTS

14. Top 10 of 2008 (Revenue ranking)
08 Revenue
Ranking Company Chinese name
(billion/RMB)
1 BAOSTEEL GROUP CO. 宝钢集团有限公司 200.64
2 METALLURGICAL CO. OF CHINA LTD. 中国冶金科工集团公司 133.22
3 JIANGSU SHAGANG GROUP 江苏沙钢集团有限公司 115.50
4 CHINA MINMETALS CO. 中国五矿集团公司 113.20
TAIYUAN
5 IRON&STEEL(GROUP)CO.,LTD.
太原钢铁（集团）有限公司 83.06
6 MAANSHAN IRON & STEEL CO.,LTD. 鞍山钢铁集团公司 79.62
7 WUHAN IRON & STEEL (GROUP) CO. 武汉钢铁（集团）公司 73.34
8 MAANSHAN IRON & STEEL CO.,LTD. 马钢（集团）控股有限公司 71.26
9 TANGSHAN IRON & STEEL CO.,LTD. 唐山钢铁集团有限责任公司 57.70
湖南华菱钢铁集团有限责任
10 HUNAN VALIN STEEL CO.,LTD 56.32
公司
* Colored company is unlisted Data Source: 新浪财经

15. Top 10 of 2008 (Google Trends)
• Sometimes Internet tells,
I firmly believe that the
higher a company in the
ranking list, the more
attention rate it receives.
Here I will use Google
Trends to illustrate my
point.
• BaoSteel is Top1,which
is indubitable, so
BaoSteel is the base
1,others will <1. With the
numbers, we can have
the ranking list!

16. Top 10 of 2008 (Google Trends)
Rank Company Chinese name Ratio
1 BAOSTEEL GROUP CO. 宝钢集团有限公司 1
2 SINOSTEEL CO. 中国中钢集团公司 0.5
3 CHINA MINMETALS CO. 中国五矿集团公司 0.33
WUHAN IRON AND STEEL (GROUP)
4 武汉钢铁（集团）公司 0.33
CO.
MAANSHAN IRON & STEEL COMPANY
5 马钢（集团）控股有限公司 0.3
LTD.
6 BEIJING SHOUGANG CO., LTD. 首钢总公司 0.29
PANGANG GROUP SICHUAN
7 CHANGCHENG SPECIAL 攀枝花钢铁（集团）公司 0.27
STEELCO.,LTD.
8 METALLURGICAL CO. OF CHINA LTD. 中国冶金科工集团公司 0.23
MAANSHAN IRON & STEEL COMPANY
9 鞍山钢铁集团公司 0.23
LTD.
TAIYUAN
10 太原钢铁（集团）有限公司 0.19
IRON&STEEL(GROUP)COMPANY LTD.
Data Source: Google Trends

17. Top 10 in 2013
• Before we start, there is need • In this study, I collected Top 20
to assume some premises: companies’ financial reports
– 1. All of the companies are (listed companies) from 03-08
doing greatest efforts for (if they have) for the OLS
development and are not calculation, then ranked
bankrupt before 2013 them. As for the unlisted
– 2. There are no mergers, companies, research on
acquisitions or consultant companies’ reports
reorganizations happening were carefully scanned for
in the above further determination, and the
companies.(Which is 100% outcome will not be ranked, I
impossible, though, just for will only point out the
an ideal condition) promising candidates for Top
10 in 2013.
BACK TO CONTENTS

18. Top 10 in 2013 (cont.)
Estimated
Raking Company Chinese name revenue(bil
lion RMB)
1 BAOSTEEL GROUP CO. 宝钢集团有限公司 390.96
2 METALLURGICAL CO. OF CHINA LTD. 中国冶金科工集团公司 0.00
3 JIANGSU SHAGANG GROUP 江苏沙钢集团有限公司 0.00
4 CHINA MINMETALS CO. 中国五矿集团公司 157.05
TAIYUAN IRON &
5 太原钢铁（集团）有限公司 157.06
STEEL(GROUP)CO.,LTD.
6 MAANSHAN IRON & STEEL CO., LTD. 鞍山钢铁集团公司 146.75
7 WUHAN IRON & STEEL (GROUP) CO. 武汉钢铁（集团）公司 131.39
8 MAANSHAN IRON & STEEL CO., LTD. 马钢（集团）控股有限公司 114.12
9 TANGSHAN IRON AND STEEL CO.,LTD. 唐山钢铁集团有限责任公司 105.23
湖南华菱钢铁集团有限责任
10 HUNAN VALIN STEEL CO.,LTD 93.92
公司
Data Source: 新浪财经
* Colored company is unlisted

19. Top 10 in 2013 (cont.)
Estimated
revenue(b
Raking Company 企业名称 illion
RMB)
11 JINAN IRON & STEEL CO.,LTD. 济钢集团有限公司 71.39
12 JIANGXI METALLURGICAL GROUP CO. 江西省冶金集团公司 67.20
13 WULAI IRON & STEEL CO., LTD. 莱芜钢铁集团有限公司 66.87
14 NANJING IRON & STEEL CO., LTD. 南京钢铁集团有限公司 47.24
PANGANG GROUP SICHUAN
15 攀枝花钢铁（集团）公司 43.12
CHANGCHENG SPECIAL STEELCO.,LTD.
16 BEIJING SHOUGANG CO., LTD. 首钢总公司 36.64
17 HANGZHOU IRON & STEEL CO., LTD. 杭州钢铁集团公司 33.36
18 SINOSTEEL CO. 中国中钢集团公司 0.68
北台钢铁（集团）有限责
19 BEITAI IRON & STEEL GROUP 0.00
任公司
TIANJIN PIPE INTERNATIONAL 天津钢管集团股份有限公
20 0.00
ECONOMIC&TRADING CO. 司
Data Source: 新浪财经
* Colored company is unlisted

20. Check point 2
• Using OLS calculation didn’t companies in the reports with
change the ranking order. good ratings will also be
Maybe it is due to the considered.
“Matthew effect ”. However, we • In conclusion, the companies I
can’t ignore the truth that some list in the following slide are
of the companies haven’t been chosen for 3 reasons:
listed, so priority should be – 1. Top 10 using OLS
given to them because once calculation with financial
listed, the companies will reports(OLS Top10)
collect funds within a short
time. – 2. Unlisted companies with
great potential(Unlisted yet)
• On the other hand, surveys on
consultant reports have been – 3. Good ratings in consultant
conducted, thus the reports(Rating)
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21. Check point 2 (cont.)
Company Chinese name Reason
BAOSTEEL GROUP CO. 宝钢集团有限公司 OLS top 10
JIANGSU SHAGANG GROUP 江苏沙钢集团有限公司 Unlisted yet
CHINA MINMETALS CO. 中国五矿集团公司 OLS top 10
TAIYUAN
太原钢铁（集团）有限公司 OLS top 10
IRON&STEEL(GROUP)COMPANY LTD.
MAANSHAN IRON & STEEL COMPANY
鞍山钢铁集团公司 OLS top 10
LTD.
WUHAN IRON AND STEEL (GROUP)
武汉钢铁（集团）公司 OLS top 10
CO.
BEIJING SHOUGANG CO., LTD. 首钢总公司 Rating
北台钢铁（集团）有限责任
BEITAI IRON & STEEL GROUP Unlisted yet
公司
TIANJIN PIPE INTERNATIONAL
天津钢管集团股份有限公司 Unlisted yet
ECONOMIC&TRADING CO.
湖南华菱钢铁集团有限责任 OLS top 10
HUNAN VALIN STEEL CO.,LTD
公司 Data Source: 东北证券、EMIS

22. Part 3
Outlook of the Steel Industry
BACK TO CONTENTS

23. Diamond Model of CHN steel industry
Firm strategy,
Opportunity structure and
rivalry
Factor Demand
conditions conditions
Related and
support Government
industries
Potter’s Diamond Model BACK TO CONTENTS

24. Diamond Model of CHN steel industry(cont.)
• Natural resource (iron ore, water), advanced factors
(technology, talented people)
Factors
Monopoly groups: CVRD, BHP Billiton, RioTinto
Limited fresh water, brain drain
• 8 demand industries: building, machine building,
Demand automobile, shipbuilding, railway, petroleum, natural gas,
conditions home appliances, container industry
Demand remains high despite the financial crisis
• Energy industry (coal, electricity), transportation industry,
Related and environmental capacity
support Support industry: electric power generation, transportation, coal
industries Related industry: automobile, home appliances, shipbuilding,
infrastructure, electromechanical
• CHN steel industry strategy, industry structure
Firm strategy,
structure and Low concentration rate, unreasonable products and
rivalry production power structure.
Lacking of the pricing power

25. Diamond Model of CHN steel industry(cont.)
Government
• 4,000 billion economic stimulus plan by State
Council
• Iron and Steel Industry Development Policies by
State Development and Reform Commission
Opportunity (Using PEST analysis method)
• Political: multipolarity, peace and development
• Economic: globalization, regional integration
• Social: the peaceful raise of CHN, G10→G2
• Technological: blockade on techniques

26. Development trends of steel industry
• Using the Potter’s diamond model and PEST analysis method,
we can propose a basic situation about CHN steel industry.
There is a long way to go, efforts are needed both from
government and industry.
• Based on above analysis, my opinion about the trends of steel
industry can be as following, the trends will be described in the
form of key words.
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27. Trend 1
• Key words:
– merger,
– acquisition,
– reorganization,
– centralization,
– supply chain

28. Trend 1 (cont.)
• To gain more powerful
competitive strength, we
need scale effect, as the
picture shows, the distribution
situation is not satisfactory.
So the moderate adjustments
are necessary.
Distribution of CHN massive steel base
Data Source: 人民教育出版社地理课本

29. Trend 1 (cont.)
Steel End
Iron ore /coal Iron ore Steel
product product
mining transport production
transport use
A highly-integrated supply chain model
• International giants like Mittal or Posco have formed their own
supply chains, the outside disturbance can hardly shake them. It
can be predicted that the future competition will be the SUPPLY-
CHAIN-VS-SUPPLY-CHAIN COMBAT. CHN steel industry must
have its own independent supply chain!

30. Trend 2
• Key words:
– recycle,
– environmental healthy,
– energy saving,
– emissions cuts
– sustainable development

31. Trend 2 (cont.)
• A healthy, friendly environment is very important. While
producing the steel the world needs, we should minimize our
social and environmental impacts, and contribute to global
efforts to development, and to tackle climate change. Report to
the 16th National congress of CPC demonstrates that we can’t
develop at the cost of environment.

32. Trend 3
• Key words:
– pricing power,
– intelligence,
– innovation,
– information sovereignty

33. Trend 3 (cont.)
• The case of Rio Tinto illustrates that we are in a age when the
information and information sovereignty(信息主权) is of vital
importance. Command of information means the power of pricing. A
state natural sciences fund (SNSF) conducted by ECNU put great
emphasis on information security and protection. There is also a
growing awareness of the concept of information sovereignty by the
officials.
• As CHN steel industry relies heavily on iron ore import, losing the
pricing power means losing everything.

34. Check point 3
Review of the 3 trends
merger, acquisition,
Trend 1 reorganization, centralization,
supply chain
recycle, environmental healthy,
Trend 2 energy saving, emissions cuts,
sustainable development
pricing power, intelligence,
Trend 3 innovation,
information sovereignty
BACK TO CONTENTS

35. Thank you!
Tom. Lu
Nov. 2009
ECNU