China’s steel industry is facing structural issues, with an overabundance of low-end supply and a significant amount of high-end imports, highlighting the problem of being “big but not strong.” In the first three quarters of this year, the national crude steel production reached 768 million tons, yet the total profits of key steel enterprises dropped by 56.39% year-on-year. Whether it’s in terms of corporate profits or high-end products, there is a significant gap between China’s steel industry and Western countries.
The China Iron and Steel Industry Association stated in a press conference on October 25 that the total profits of key statistical steel enterprises in the first three quarters of the year decreased by 56.39% year-on-year, indicating a significant decline in economic efficiency as an industry-wide issue.
According to data from the National Bureau of Statistics of China, in the first three quarters of this year, the cumulative crude steel production in the country was 768 million tons, a 3.6% decrease compared to the same period last year. The apparent consumption (production plus net imports) was 688 million tons, down by 6.2% year-on-year.
A report by Nikkei’s Chinese website in June 2024 indicated that in terms of profit per ton of crude steel from January to March 2024, among eight major global steel companies, Nippon Steel had the highest profit at around $113, surpassing ArcelorMittal’s approximately $74 and POSCO’s about $50, with Baoshan Iron and Steel of China at around $30 ranking the lowest.
It should be noted that Baoshan Iron and Steel is considered to be the most profitable enterprise in China’s steel industry.
According to statistics from Mysteel Steel Network, in the first half of 2024, the total operating income of 36 listed steel companies in China was 1.016 trillion yuan, but the total net profit was only 2.944 billion yuan. Baoshan Iron and Steel ranked first with a net profit of 4.545 billion yuan, followed by CITIC Pacific Special Steel at 2.725 billion yuan in second place, and Hesteel Group at 1.331 billion yuan in third place.
In 2023, the total operating income of 35 listed steel companies was 2.155 trillion yuan, with a total net profit of only 20.874 billion yuan. Baoshan Iron and Steel ranked first with a net profit of 12.007 billion yuan, followed by CITIC Pacific Special Steel at 5.721 billion yuan in second place, and Hesteel Group at 5.079 billion yuan in third place.
Genuino M. Christino, the Chief Financial Officer (CFO) of ArcelorMittal, has urged that deficit Chinese enterprises are exporting steel in large quantities to major markets, calling for trade measures to be taken.
China accounts for more than half of global steel production. According to the World Steel Association’s “World Steel Statistics 2024” report, global crude steel production reached 1.892 billion tons in 2023, with China producing 1.0191 billion tons, accounting for a staggering 53.86% share and maintaining its position as the world’s top producer.
However, it is worth noting that according to China’s customs data, in the first three quarters of the year, the cumulative steel exports reached 807.1 million tons, with an average export price of $770 per ton. Contrastingly, the cumulative steel imports totaled 51.9 million tons, with an average import price as high as $1,673 per ton.
As the world’s largest producer and consumer of steel, what high-priced steel products has China been importing?
According to a report titled “Operational Assessment of the 2023 Annual Board of Directors of CITIC Pacific Special Steel,” in 2023, China imported 2.989 million tons of special steel, amounting to $6.267 billion. As per data from the China Iron and Steel Industry Association, in 2023, steel imports totaled 7.645 million tons, with an average import price of $1,658.5 per ton.
Calculations show that the import volume of special steel in 2023 accounted for 39% of the total steel imports, reaching nearly 40%.
According to a research report released by Guosen Securities in December 2023, the demand for special steel is mainly concentrated in high-end manufacturing sectors such as automotive, industrial manufacturing, metal products, and power generation, with automotive special steel accounting for approximately 40% of the total demand.
Special steel possesses characteristics such as high strength, toughness, wear resistance, and corrosion resistance, with types including carbon structural steel, alloy structural steel, spring steel, bearing steel, gear steel, stainless steel, electrical silicon steel, die steel, tool steel, and high-temperature alloy steel, each tailored to specific engineering applications based on their unique chemical composition and properties.
According to a report by BeiZe Information Consulting Co., Ltd., the main global special steel producers include Sweden, Japan, the United States, Germany, France, Italy, Spain, and South Korea, accounting for approximately 60% of global special steel production and about 80% of trade volume.
Citing data from the Shanghai Information Service Platform website, the global proportion of special steel to total steel production currently ranges between 10% and 15%, with Sweden having the highest share, exceeding 50%, and Germany, Japan, and Italy all surpassing 20%.
According to a study report by CICC Questmo International Information Consulting Co., Ltd. published in the “Global and Chinese Special Steel Industry Market Development Trends and Market Share Analysis (2024 Edition),” China’s special steel production in 2023 accounted for 5.02% of the total steel production but lagged significantly behind advanced manufacturing countries like Sweden, Japan, Germany, and the United States.
An article by the Shanghai Information Service Platform also noted that in terms of patent statistics, Japan, the United States, South Korea, and Germany are the top four technology source countries in the global special steel materials field. Japan leads in special steel materials with high-end products and strong comprehensive competitiveness; the United States has mature special steel enterprises with specialized and refined products; Germany, as the EU’s largest steel producer, has significant advantages in the field of special steel materials.
An article by China News Network titled “How can China’s steel industry truly shed the label of ‘big but not strong’?” mentioned that special steel represents a country’s level of steel industry manufacturing and is often considered a crucial indicator of whether a nation can become a steel power.
Data provided in the article regarding global special steel material patent publications from 2000 to 2022 indicated that among the top ten patent applicants globally, Japanese institutions held seven positions, underscoring Japan’s dominant role in the special steel materials field. The remaining three positions were held by South Korea’s POSCO, China’s Baosteel, and Luxembourg-based ArcelorMittal.
By comparing the number of patents applied for by each country, Japan had more than 40,000 patents, followed by the United States with over 15,000, while China had less than 5,000 patents, ranking fifth worldwide.
Xin Renzhou, former Inspector of the Industry Policy Department of the Ministry of Industry and Information Technology, pointed out that China has 70 shortcomings in steel materials, mainly concentrated in eight steel-consuming sectors such as aerospace, advanced rail transportation, marine engineering and high-tech ships, automobiles, and energy.