How was iron processing introduced in China?

China produces over 60 percent of the world's steel

Since the beginning of 2019, China has increased its share of the world market for steel by ten percent. At the same time, the country refuses to engage in international dialogue about reducing excess capacities.


China further expanded its dominant position in the global steel market in the first half of 2020. Since April, the share of Chinese crude steel in the world market has for the first time and consistently exceeded the threshold of 60 percent, as figures from the World Steel Association show. At the beginning of 2019, the Chinese share was just over 50 percent. Although global steel production temporarily collapsed as a result of the corona pandemic in April, China significantly expanded its capacities in the meantime, from just under 79 million tons in March 2020 to over 93 million tons in July. As a result, China is the undisputed leader in the global steel market, as it is with other metals. The share of the second largest steel producing country, India, looks comparatively small at around 7 million tons and a world market share of 4.6 percent. As the sixth largest steel producer, the USA has a 3.5 percent share of the world market, Germany - ahead of Italy with the largest steel industry in Europe - has 1.6 percent. At the beginning of 2019, the German share was still around 2.3 percent.


The surge in Chinese production is also linked to increased domestic demand, according to a report by Reuters news agency. The Chinese government has boosted infrastructure spending, while the manufacturing industry has restarted operations after the lockdown. The automotive and construction industries determine demand. The capacity utilization of the 247 steelworks in China was over 95 percent in mid-August.

2020 | OriginalPaper | Book chapter

Development Road of China’s Modern Iron and Steel Industry

The development of the modern iron and steel industry in China began in 1949 when the People’s Republic of China was founded. In the past 70 years, along with China’s growth and development, the modern iron and steel industry in China has experienced a great course of recovery, growth, and rise.

China has dominated the steel market for decades

Despite its strength, the Chinese steel industry is also facing serious challenges, especially in connection with strong overcapacities and weak innovative capacity, as Xinchuang Li analyzes in the chapter Development Road of China’s Modern Iron and Steel Industry in the book The Road Map of China's Steel Industry. It is true that China has already made considerable efforts to transform its iron and steel industry, including the decision taken in 2016 to reduce production capacities from backward steelworks by 140 million tons within five years, without the problem of the partially technologically backward steelworks to fix completely. There is still a lack of long-term investments in innovation, and cooperation between production and research is still not well developed.

Nevertheless, according to the author, China will play the leading role in the global steel market for decades. He gives five reasons for this:

  1. China is the economy with the largest and most dynamic demand for steel. In 2016, China already consumed 45 percent of global steel production with 728 million tons.
  2. In a global comparison, China has the most extensive steel industry, including the planning and construction of steelworks, suppliers, production and operation or research into new technologies.
  3. The Chinese steel industry can fall back on the world's largest pool of skilled workers, among other things due to numerous metallurgical universities.
  4. China's steel industry has state-of-the-art technologies. More than half of the production facilities are also of an advanced level on an international scale.
  5. China's iron and steel industry has the world's fastest and most punctual service system.

Since no other countries and regions with more than a billion inhabitants would industrialize and urbanize at such a rapid rate, the author expects the People's Republic to lead the global steel industry for at least a hundred years.

Subsidies, dumping prices and overcapacity

Despite the large production capacity, China is only the sixth largest importer of rolled steel to the EU after Russia, Turkey, Ukraine, South Korea and India. According to figures from the German Steel Federation, Russia imported 7.3 million tons of rolled steel into the EU in 2019, almost four times as much as China. Nevertheless, China has been criticized for years. According to the Steel Federation, the People's Republic grants sales tax reductions on exports, it subsidizes domestic industry and it levies import duties. In addition, in 2019 the country left the Global Forum on Steel Excess Capacity (GFSEC) founded by the G20, which was supposed to remedy deficiencies such as WTO-negative subsidies and dumping prices in the global steel market as part of a dialogue between the steel-producing countries. In the Steel Action Plan, the German government is even considering a joint approach by steel producing countries, which are particularly suffering from overproduction, should China not return to the table of the GFSEC.

The problem of overcapacity is a general one in the global steel industry. According to the OECD, global overcapacities were already 737 million tons in 2016. For comparison: Germany produced 42 million tons of steel in 2016. The World Steel Association is anticipating a long-term increase in demand of one percent a year. At the same time, however, numerous countries are investing in a further expansion of their capacity that exceeds the growth in demand. According to the OECD, capacities increased by 1.5 percent in 2019 alone, and another two to three percent could be added in the period up to 2022.

The fact that existing overcapacities are difficult to reduce has solid economic and political reasons, as Roland Döhrn in his article Steel crisis reloaded? Situation and prospects for the German steel industry for the economic service 1/20 explained. Steel production is very capital intensive. The high sunk costs induce steel companies to use existing systems for as long as possible and to utilize them to the full. In addition, steelworks are often located in structurally weak regions, which is why politicians try to avoid closings of locations and the loss of several thousand jobs.