Chinese Steel Industry: Change And Development

The iron and steel industry has been a backbone of the Chinese development in the latest years, growing at a very fast pace and leading to a major industrial internationalization. Nonetheless its actual status is living a period of change, started in the first years of the century and quickly evolving. The steel industry was divided between many small companies, leading to a poor use of resources, slow technological improvements and low general quality. A lot has changed during the years between 2001 and 2010, but many aspects still have to be solved. There has been an impressive leap forward regarding the use of more modern technologies and good policies have been taken on by the government to ensure a smooth growth. Some issues remained and some new problems arose with the changes:resources and raw materials previously used has been substituted by more qualitative products, especially regarding coal and iron ore, reducing China's capability to self-supply its industry. Costs started to increase, and in 2009 China became a net importer of coal for the first time.The immediate consequence of the increased use of coal has been the international attention to Chinese pollution levels and demands to decrease the amount of greenhouse gas emissions.This thesis starts from the premises that the lack of coal, especially coking coal for metallurgical use, and the need for emission reduction, will constrict the growth of the Chinese steel industry in the near future. An industry analysis on those two factors immediately shows that internationalization is the key element for China's steel industry to continue its growth. Internationalization means in this scenario:M&A with overseas companies to take advantage of foreign mines and resources, to improve technical know-how, and to become competitive on the more high quality demanding western markets.While taking advantage of imported resources China will have the chance to improve pre-existent technologies that allow lowering coal needs and pollution levels, or to R&D brand new technologies, like Baosteel Co., one of the biggest Chinese steel companies, is already doing.