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Development and Outlook of
Chinese Steel Industry
China Metallurgical Industry Planning and Research Institute
PLAN FOR FUTURE STUDY FOR DEVELOPMENT
March. 2017
Contents
Ⅰ Development of Chinese steel industry
Ⅱ
China Metallurgical Industry Planning and Research Institute http://www.mpi1972.com
Excess capacity elimination of Chinese steel industry
Ⅲ Outlook of Chinese steel industry
Ⅳ MPI——your reliable partner
Ⅰ Development of Chinese steel industry
http://www.mpi1972.com
1800 ~ 1880: The crude steel output in England took up more than 50% of the world volume;
1880 ~ 1910: The steel industry in USA and Germany kept cropping up;
1910 ~ 1950: The crude steel output in USA reached 26.5 million tons which took up nearly 50% of the world
volume; the crude steel output in Germany reached 13.7 million tons which took up more than 20% of the world
volume;
1950 ~ 1970: The former Soviet Union surpassed Germany and became the world’s second largest producer;
1970 ~ 1989: The former Soviet Union became the world’s first producer; the steel industry in Japan kept cropping
up and ranked second in the world;
1989 ~ 1996: Upon disbandment of the former Soviet Union, Japanese steel industry ranked first in the world;
Chinese and South Korean steel industries kept cropping up. And Chinese steel industry ranked second in the world;
After 1996: Chinese steel industry maintained first in the world; in 2016, Chinese crude steel output took up 50.3%
of total output in the world.
1 Development of global steel industry
China Metallurgical Industry Planning and Research Institute
1800-1880 1910-1950 1953-1970 1970-1989 1989-1996 1996-2005
1 UK USA USASoviet Union
Japan China
2 USA GermanySoviet Union
Japan China Japan
3 Germany UK Germany USA USA USA
Country2015 2014
Rank Output Rank Output
China 1 803.8 1 822.8
Japan 2 105.2 2 110.7
India 3 89.4 4 87.3
USA 4 78.8 3 88.2
India surpassed the
USA as the third biggest
steel producer in 2015.
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1 Development of global steel industry
China
India
Africa
Southeast
Asia
Dri
ven b
y e
conom
ic d
evelo
pm
ent
UK
USA Japan
China
South KoreaGermany Soviet Union
The end of 19th century
Around 1945
Around 1970
Around 1995
Driv
en
by te
ch
no
log
ica
l ad
va
nce
me
nt
China Metallurgical Industry Planning and Research Institute
(4)
Development of world steel industry can be roughly divided into three stages since the Second World War.
Stage 1: From the Second World War up to the beginning of 1970’s, the steel industry developed rapidly for long term
dominated by the Western countries.
Stage 2: From the beginning of 1970’s up to the end of 20th century, the steel industry grew slowly and steadily with
fluctuation under influence of oil crisis, economic restructuring of the Western countries and disintegration of the Soviet Union.
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1 Development of global steel industry
Unit:
108 t
Stage 3: The world steel
industry grew again since 2000
driven by rapid development of
Chinese steel production and
consumption. The global crude
steel output increased from
850 million tons to 1.665 billion
tons within about 10 years,
among of which 690 million
tons increase provided by
China, accounted for 85.2% of
total growth.
In 2015, world crude steel
output was 1.62 billion tons
decreased by 2.8% year-on-
year. And in 2016, world crude
steel output was 1.6285 billion
tons increased by 0.8% year-
on-year.
From our point of view, the
world steel industry will enter
the fourth stage experiencing a
long period of adjustment.
China Metallurgical Industry Planning and Research Institute
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Chinese Steel Consumption in from 1980 to 2016
7.02亿吨
From 1980 up to 2000, Chinese steel consumption rose slowly with fluctuation. From
2001 up to 2014, Chinese steel consumption increased rapidly and hit the historical
peak value 702 million tons in 2014. But the steel consumption decreased to 664
million tons in 2015 with 5.4% drop year-on-year, which was the first time since 1996.
Chinese actual steel consumption was 673 million tons in 2016 driven by automobile,
infrastructure and real estate, increased by 1.3% year-on-year.
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2 Chinese steel consumption and production
702 million tons
China Metallurgical Industry Planning and Research Institute
8 http://www.mpi1972.com
2 Chinese steel consumption and production
China Metallurgical Industry Planning and Research Institute
Phase 1: Fluctuating
development in the
initial stage
Phase 2 (7.9% increase on
average/year):
Stable development in the
beginning stage
Phase 3(14.2% increase
on average/year): Leap-forward
development in the
accelerating stage
Phase 4: Innovative development in
the transition stage (transition period
from Phase 3 to Phase 4)
Unit: 104t
9
3 Competitiveness of Chinese steel industry
China Metallurgical Industry Planning and Research Institute http://www.mpi1972.com
The steel industry, as one of the most competitive Chinese
manufacturing industries, has already achieved “5G”.
Good
price
Good
product Good
brand
Good
service
Good
scale
“5G”
Chinese steel industry enjoys the world’s
largest and most dynamic domestic
demand.
3. Competitiveness of Chinese steel industry – the strongest domestic demand worldwide
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In 2015, Chinese steel consumption
was 664 million tons, which
accounted for 48.9% of global steel
consumption.
Currently, Chinese economy is in a
reasonable development interval
represented by constant release of
reform effect and generation of new
growth drive. Against the new normal
of slow economic growth, China has
greatly promoted the stable and
balanced development of domestic
demand and promoted the investment
and policy guidance in research &
development, high-end manufacturing
industry, ecological environmental
protection and infrastructure
construction. The stable development
of traditional industries and emerging
of new industries are expected to
maintain Chinese steel consumption
in a vigorous state over a long term.
Building360
million tons
Ship building
13.5 million tons Automobile
49.5 million tons
Machinery 130 million
tons
Railway4.8 million
tonsElectric
appliances 10.8 million
tons
Energy resources32 million
tons
Container5.5 million tons
China Metallurgical Industry Planning and Research Institute
11http://www.mpi1972.com
The complete industrial
system has led to great
development of
Chinese steel industry
3 Competitiveness of Chinese steel industry
Competitive steel
enterprises,
such as BaoSteel, HBIS,
ShaSteel etc.
Third party professional
consulting institutions
such as MPI
Upper stream supporting
industries including iron ore,
coal, power etc
Down stream consumers
including building, machinery,
automobile etc
Cultivation and scientific research
base of metallurgical talents such as
University of Science and Technology
Beijing, Northeast University, Central
Iron & Steel Research Institute etc.
Trade
Auxiliary
materials
Agent
Engineering
Facilities
Construction
China Metallurgical Industry Planning and Research Institute
12http://www.mpi1972.com
Advanced process and technical equipment and concept of systemization and
integration have laid a solid foundation for the rapid development of Chinese
steel industry.
3 Competitiveness of Chinese steel industry
Green development: The energy
saving and environmental
protection technologies and
facilities are applied widely.
Systemization: The integrated
and systematic optimization and
upgrading are being more and
more valued.
Continuity: The continuous
casting and rolling
processes and technologies
are optimized constantly,
and the process
completeness is constantly
upgraded.
Automation: One-key automatic steel
making as well as Level II and Level III of steel rolling are applied widely.
Precision: The product
dimension control and
controlled rolling and
cooling technologies
are promoted rapidly.
Large scale: The ratio of
advanced capacity to total
capacity of coking, sintering, iron
making, steel making and steel
rolling increased constantly.
China Metallurgical Industry Planning and Research Institute
Process and
Technical
Equipments
13
3 Competitiveness of Chinese steel industry
Consulting
institute
Innovative
platform
University
and institute
The whole industry has established 16
national key laboratories, 5 project
laboratories, 12 project technical centers,
10 project research centers, 33
enterprise technical centers and 17
innovative enterprises.
Professional colleges: University of Science and
Technology Beijing; Northeastern University
Professional scientific research institutions: Central Iron
& Steel Research Institute ; Institute of Process Engineering
Enterprise research institutes: BaoSteel research institute
and WISCO research institute
Professional consulting institution:
MPI
Professional trading group:
Minmetals
Professional design and
construction group: MCC
Professional technical staff
Professional management staff
Professional research and
development staff
Professional
consulting team
Professional
training team
Professional design
team
Professional
construction team
Professional technical
staffs
Professional technical
transfer staffs
Professional project
application staffs
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14 http://www.mpi1972.com
4 Chinese steel industry in 2016——Production
In 2016, Chinese crude steel output was
808 million tons, pig iron output was 701
million tons and steel product output was
1.138 billion tons (including repeated
products), increased slightly by 1.2%,
0.7% and 2.3% respectively.
From January to February 2017, Chinese
crude steel output was 128.77 million tons
increased by 5.8% year-on-year. And daily
crude steel output was 2.1825 million tons
increased by 0.65% based on the same in
December 2016.
In February 2017, PMI of Chinese steel industry expanded to 51.4% based on 1.7 points growth
month-on-month, which was the highest level since May 2016. Except for new export order and final
products inventory, another ten indexes rose up to more than 50% showing a better condition of steel
industry in aspects of production, procurement, sale, employees etc.
China Metallurgical Industry Planning and Research Institute
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China became the net steel exporter for the first time in 2006 since the foundation of PRC. Accumulative Chinese
steel export exceeded the import only up to 2014. And Chinese steel export expanded continuously after the
international financial crisis. In 2015, Chinese steel net export was 99.62 million tons. In 2016, Chinese steel export
was 108.43 million tons decreased by 3.5% year-on-year, and steel import was 13.21million tons increased by
3.4% year-on-year. The iron ore and ore fines import was 1.024 billion tons increased by 7.5% year-on-year.
According to the data released by the Customs, Chinese steel export was 5.75 million tons in February 2017
decreased by 1.67 million tons comparing with that in January showing continuous drop in the past three months,
and decreased by 29.1% year-on-year. From January to February 2017, Chinese steel export was 13.17 million
tons decreased by 25.7% year-on-year, while steel import was 2.18 million tons increased by 17.6% year-on-
year.
In 1979, Chinese steel export was 368,000
tons, and the same increased to 112.4 million
tons in 2015 hitting a new historical high,
which was 305 times of the export in 1979.
Significant growth of Chinese steel export
attributed to improvement of international
competitiveness consisting of high quality,
good service and affordable price.
Chinese steel import show a stable trend.
From 1979 up to 2003, Chinese steel import
rose with fluctuation. In 1980, Chinese steel
import was 5.01 million tons, and the number
up to 37.17 million tons in 2003 hitting a new
historical high. From 2004 up to 2016, steel
import was maintained at about 13 million
tons.
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Import
4 Chinese steel industry in 2016——Import & Export
China Metallurgical Industry Planning and Research Institute
Export
http://www.mpi1972.com
Regulation of Adjustment of Chinese Steel Industry (Draft) —— Steel products and
service fully satisfy growth of national economy.
Adjustment and Upgrading Plan of the Steel Industry in the 13th Five-year Period——
Domestic steel occupies more than 99% market basically meet requirement of economic
growth and social development.
In 2016, there are 49 trade cases against Chinese steel export increased by 32.4%
comparing with that in 2015 e.g. temporary anti-dumping duties is launched by Indian
government; the Europe Union is nearly completed anti-dumping investigation against flat
products covering cold rolled coil, hot rolled coil, medium/heavy plate etc; the USA
launches 337 investigation against Chinese carbon alloy steel.
4 Chinese steel industry in 2016——Import & Export
China Metallurgical Industry Planning and Research Institute
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4 Chinese steel industry in 2016——Import & Export
More than 87% comes from
Japan, South Korea and Taiwan.
In 2016, Chinese steel import was
13.214 million tons mainly came from
Japan, South Korea and Taiwan, from
which the steel import was 11.505
million tons accounted for 87.1% of total
import.
No CountryImport in
Dec.
Import from
Jan. to Dec
Accumulative
import in the
same period of
2015
Accumulative
growth/drop
Accumulative
increase/decrease
(%)
1 Japan 51.2 553.3 548.3 5.0 0.92
2 South Korea 39.2 440.0 399.1 40.9 10.25
3Taiwan,
China13.9 157.2 157.9 -0.7 -0.45
4 Germany 4.3 51.1 48.6 2.4 5.04
5 France 1.3 17.3 18.5 -1.2 -6.42
6 Others 9.0 102.6 106.1 -3.4 -3.2
Total 119.0 1321.4 1278.3 43.1 3.37
Export mainly to South Korea,
Vietnam, Philippines, Thailand
etc.
In 2016, Chinese steel export was
108.49 million tons mainly to South
Korea, Vietnam, Philippines, Thailand,
Indonesia etc.
In 2016, export of Chinese steel
product was confronted with 48 cases
of trade investigation increased by
29.7% year-on-year.
No CountryExport
in Dec.
Export from
Jan. to Dec.
Accumulative
export in the
same period of
2015
Accumulative
growth/drop
Accumulative
increase/decrease
(%)
1 South Korea 104.8 1433.7 1349.3 84.3 6.25
2 Vietnam 80.3 1166.5 1014.9 151.6 14.94
3 Philippines 53.2 651.9 560.9 90.9 16.21
4 Thailand 31.2 620.8 473.1 147.7 31.22
5 Indonesia 55.4 582.9 510.5 72.4 14.18
6 Malaysia 18.8 334.1 331.2 2.9 0.87
7 India 26.9 331.5 476.1 -144.6 -30.37
8 Saudi Arab 11.8 309.8 265.9 43.9 16.52
9 Singapore 16.4 296.3 322.5 -26.2 -8.13
10 Pakistan 25.8 291.0 255.5 35.5 13.89
11 Others 355.6 4830.8 5679.2 -848.4 -14.9
Total 780.2 10849.2 11239.2 -390.0 -3.47
Import
Export
China Metallurgical Industry Planning and Research Institute
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In 2016, members of CISA made sales revenue
of 2.8 trillion yuan with total profit of 30.378
billion yuan. The return on sales was 1.08%
increased by 3.81 percentage points year-on-
year.
4 Chinese steel industry in 2016—— Profitability
Although changed from loss into
profit, the profitability level is still low.
Profitability of Large/Medium-scale Steel Enterprises from
Jan 2015 to Dec 2016
Change of Sales Revenue of Large/Medium-scale Steel
Enterprises in 2016
Change of Debt Ratio of Large/Medium –scale Steel
Enterprises from Jan 2015 to Dec 2016
China Metallurgical Industry Planning and Research Institute
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4 Chinese steel industry in 2016—— Investment
In 2016, investment for the ferrous metals
smelting and extruding industry was totally
416.1 billion yuan decreased by 9.4 billion yuan
with 2.2% drop.
In 2016, ferrous metals mining and dressing
industry has completed the investment of 97.8
billion yuan decreased by 28.4% year-on-year.
Excess capacity elimination promoted by the
central government has already presented
remarkable progress. Newly-built capacity was
prohibited strictly, and investment dropped
accordingly.
Investment for the steel industry dropped
China Metallurgical Industry Planning and Research Institute
Change of Investment for Ferrous Metals Smelting and Extruding
Industry from Jan to Dec 2016
Change of Investment Growth for Ferrous Metals Smelting and
Extruding Industry from Jan to Dec 2016
InvestmentGrowth y-o-y
Change of Investment for Ferrous Metals Mining and
Dressing Industry from Jan to Dec 2016
InvestmentGrowth y-o-y
State
Steel
Ⅱ Excess capacity elimination of Chinese steel industry
21http://www.mpi1972.com
Excess capacity of the steel industry is the common problem worldwide, not only the story in
Chinese market. The world steel industry should solve the problem together instead of blame
Chinese market only.
During the 12th Five-year Period, China has already removed iron making capacity of 90.89 million
tons and steel making capacity of 94.86 million tons, exceeded 44.3% and 50.6% respectively
based on the target of 63 million tons, showing a practical result of excess capacity elimination.
Backward Capacity Elimination of the Steel Industry from 2011 to 2015
Year 2011 2012 2013 2014 2015 合计
Iron making
(104 t)3,192 1,078 618 2,823 1,378 9,089
Steel making
(104 t)2,846 937 884 3,113 1,706 9,486
1 Excess capacity elimination in the 12th Five-year
China Metallurgical Industry Planning and Research Institute
Notes: Capacity mentioned above are released jointly by MIIT and Bureau of Energy Resources, among of which data in 2015 is
statistics not been released yet.
22http://www.mpi1972.com
One target, four tasks and five supporting policies were formulated in the Guideline of
Excess Capacity Elimination of the Steel Industry released by the State Council on
February 4th 2016.
2 Regulations of excess capacity elimination
China Metallurgical Industry Planning and Research Institute
TargetRemove 100-150 million tons crude steel
capacity within 5 years from 2016.
Main Tasks
No newly-built
capacity permitted
Remove excess
capacityStrict enforcement
and supervision
Promote upgrading of
the steel industry
Supporting Policies
Subsidies Taxation Financing support
Staff resettlement Flexible use of land
China gave a
good example of
excess capacity
elimination by
strong
determination,
unwavering
confidence and
perseverance to
demonstrate
responsibility of
a great power.
23http://www.mpi1972.com
Eliminate the capacity, not comply with regulations, industrial policies or criterions by
means of strict enforcement and supervision in environmental protection, energy
resources, quality, safety and technologies in order to promote healthy and sustainable
development of steel enterprises, which represented by more space given by
environmental protection, high profitability contributed by energy conservation, big market
share relied on quality and brand, substantial security supported by safe production and
solid foundation depended on technologies improvement.
Provide a smooth channel to encourage steel enterprises to remove capacity by
means of reduction on the enterprises’ own initiative, M & A, transformation,
international cooperation etc emphasizing the enterprises without production or
cannot survive. It is also strictly prohibited to restart the production once market
becomes better.
2 Regulations of excess capacity elimination
China Metallurgical Industry Planning and Research Institute
http://www.mpi1972.com
A signed article titled Economic Openness Serves Everyone Better by Mr. Li Keqiang, Premier of the State Council of the People‘s Republic of China as published on January 27th 2017.
Structural reform showing positive results.
In 2016, China has already removed excess steel capacity of more
than 65 million tons, coal capacity of more than 290 million tons.
It is proposed to further eliminate steel capacity of 140 million tons
and coal capacity of 800 million tons in the coming 3-5 years to make
sure the healthy level of industrial development.
Employment training is available for transferred staff by joint effort
of government and enterprises. 700,000 employees have been
rearranged in 2016.
3 Achievements of excess capacity elimination in 2016
Exceeded 44.4% of target showing a periodical achievement
of excess capacity elimination of steel and coal industry.
China Metallurgical Industry Planning and Research Institute
http://www.mpi1972.com
4 Guidance of excess capacity elimination
Year 2017 is an important time to implement Development Plan in
the 13th Five-year and deepen Supply-side Structural Reform.
Further promote excess capacity elimination of steel and coal
industry.
Remove zombie companies.
Strictly implement environmental, energy, quality, safety etc
regulations and standards.
Promote M & A
Deal with the debt and staff transfer properly
Avoid reproduction of removed capacity
Implement every tasks already
prepared and complete policies and
measures complying with new
conditions and problems to try to get
practical results of five tasks.
(Dec14-16th 2016)
China Metallurgical Industry Planning and Research Institute
Central Economic Work Conference
Supply-side Structural Reform
Further excess capacity elimination of the steel industry
accelerate exit and close of zombie companies
remove capacity failure to comply with environmental, quality,
energy, water consumption and safety standards.
Capacity of backward rebar produced by induction
furnace must be removed completely; backward capacity
needed to be eliminated must be removed.
http://www.mpi1972.com
4 Guidance of excess capacity elimination
Ex
ce
ss
Ca
pa
cit
y
Elim
ina
tio
n in
20
17
Fight for excess capacity elimination by common view, firm
determination, strict law enforcement and comprehensive
administrative management.
According to the Report on the
Work of the Government, it is
proposed to further remove steel
capacity of about 50 million tons.
China Metallurgical Industry Planning and Research Institute
http://www.mpi1972.com
4 Guidance of excess capacity elimination
Structural adjustment and modification
projects must comply with principle of
reducing replacement.
Steel projects to be built or under
construction, which already been
approved by central or local
government must comply with principle
of reducing replacement.
Ratio of reducing replacement in Beijing-Tianjin-Hebei, Yangtze
Delta and Pearl River Delta should be 1:1.25.
Eliminated capacity in and before 2015, backward capacity, capacity
listed in the reduction program as well as eliminated capacity supported
by subsidies can not be considered for replacement.
Adjustment and Upgrading Plan of
the Steel Industry (2016-2020)
China Metallurgical Industry Planning and Research Institute
http://www.mpi1972.com
5 Policies prospect
How the industrial policies make force?
What will be the important directions of structural
adjustment of the steel industry?
China Metallurgical Industry Planning and Research Institute
29
Environmental measure is one of the most effective way to eliminate
excess capacity.
-- Steel companies in Beijing-Tianjin-Hebei must apply for new discharge permit up to
the end of October, otherwise can not production any more.
-- Apply for new discharge permit, but failure to follow the items listed in the permit, will
be determined as violation of environmental regulations.
-- Assessment of emission standards of the steel industry
-- Existing standards should be strengthened further
5 Policies prospect
New discharge permit
Stricter emission standards
China Metallurgical Industry Planning and Research Institute http://www.mpi1972.com
http://www.mpi1972.com
5 Policies prospect
Improve green and low carbon development regulation system
— The central government is formulating the Regulation of Coping with Climate Change
and supported rules. As an important carbon emission industry, the steel industry will
also formulate codes accordingly such as Action Plan on Coping with Climate Change,
Carbon Trade Administration of the Steel Industry etc.
— MIIT has proposed to establish a green manufacturing system in 2016 covering
green plant, green product, green industrial zone and green supply chain.
Promote excess capacity elimination by economic measures
— In 2017, NDRC and MIIT jointly issued Notice on Promotion of Supply-side Reform
of the Steel Industry by Economic Measures emphasizing adoption of differential power
price to promote excess capacity elimination of the steel industry.
China Metallurgical Industry Planning and Research Institute
31http://www.mpi1972.com
6 Improvement of competitiveness
Field Index Illustration
Basic
competitiveness
Scale
Crude steel output
Scale and capacity utilization。Sales revenue
Capacity utilization rate
Technical
level
Process equipments
Materials basis and support ability
Intelligence
Raw
materials
and fuel
security
Procurement and management of iron ore,
scrap etc.
Procurement and management of coal,
coke etc
Development
competitiveness
Human
resources
Labor production value Labor production value efficiency
Per capita income Human resources value
Productivity of main business Productivity of steel making
R & D and
innovation
R&D investment R & D cost and staff arrangement
Effective patent Number of intellectual property right
Service ServiceCoordination with downstream customers and
value-added of business
Environm
ental
Energy efficiency Environmental level and restriction of
environmental issues imposed to the enterpriseEmission
Logistics Logistics efficiency and cost Impact of logistics on competitiveness
Performance
competitiveness
Total profitTotal profit
ProfitabilityTax
Profitabilit
y
Sales profit margin Margin
ROA Return on assets
Capital
chain
Cash flow Cash flow
Debt ratio Turnover, capital chain and capital management
Quick ratioRepayment ability
Current ratio
China Metallurgical Industry Planning and Research Institute
32http://www.mpi1972.com
6 Improvement of competitiveness
China Metallurgical Industry Planning and Research Institute
Ranking of Competitiveness of Steel Companies
Output of Different Ranking
Proportion of Output of Different Ranking
Ⅲ Outlook of Chinese steel industry
34http://www.mpi1972.com
Forecast of steel demand
1 Forecast of Chinese steel demand in 2017
Chinese steel demand in 2017 is forecasted by means of consumption coefficient and
down stream industries consumption. It is predicted that Chinese steel demand in 2017
will be 660 million tons decreased by 1.9% year-on-year.
No. MethodSteel consumption in
2016 (108 t)
Steel demand in
2017 (108 t)Weight
1Consumption
coefficient6.79 6.64 0.4
2
Down stream
industries
consumption
6.64 6.58 0.6
Forecast 6.73 6.60
Forecast of Chinese Steel Consumption in 2017
China Metallurgical Industry Planning and Research Institute
http://www.mpi1972.com
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Demand: pig iron output including DRI increased
from 860 million tons in 2005 to 1.28 billion tons in
2013, and then showing a downturn. In 2016, pig
iron output including DRI was 1.22 billion tons
consuming iron ore (TFe 62%) of about 1.93 billion
tons decreased slightly by 0.4% year-on-year.
Supply: world iron ore output increased
from 1.31 billion tons in 2005 to 2.01 billion
tons in 2015. In 2016, iron ore output
increased slightly to about 2.05 billion tons.
2 Iron ore supply, demand and price
China Metallurgical Industry Planning and Research Institute
Iron ore demand / 104t Pig iron output/104 t
World iron ore output/108 t Growth year-on-year
36http://www.mpi1972.com
Supply (by countries): In 2016,
Australia and Brazil exported iron ore of
about 843 million tons and 374 million tons
increased by about 4% and 2.1%
respectively.
Although excess supply relieved a little bit, the world iron ore market will still show an oversupply.
Supply and demand of the iron ore market will be adjusted to a new balance with fluctuation.
Supply (by companies): In 2016, top 4 producers
all increased iron ore output comparing with that in 2015,
total output of which was about 1.026 billion tons,
increased by 2.5% year-on-year. It is predicted that
world iron ore export will be about 1.52 billion tons with
slight growth.
2 Iron ore supply, demand and price
China Metallurgical Industry Planning and Research Institute
Demand:
1.107 billion tons
(output of pig iron
is 700 million tons)
increased slightly
by 0.7% year-on-
year.
http://www.mpi1972.com
37
• More imported iron ore
• High port inventories; growth of
inventory hit the highest level in the
past 5 years.
• import Iron ore independence level
up to 87.3%
• Imported ore has been and will be the
most important raw materials
guarantee for Chinese steel industry
over a long period of time.
Supply
Demand
Iron ore supply
and demand in
China in 2016
Domestic ore:
1.281 billion
tons raw ore,
decreased by
3.0% year-on-
year.
+
Iron ore import:
1.024 billion tons
increased by 7.5%
year-on-year
Inventory on 17th
March,2017
Total: 131.82 million
tons at ports; 42.65
million tons at steel
plants.
2 Iron ore supply, demand and price
China Metallurgical Industry Planning and Research Institute
http://www.mpi1972.com
38
Four
trends
Oversupply of the world iron ore market last for long-term Rely on imported iron ore last for long-term
Iron ore price maintained at lower level with
fluctuation over a long period of timeScrap to replace iron ore step by step
Supply of top 4 nearly keep the same in 2017.
Considering capacity expansion of about 30 million
tons of top 4 and some newly started projects e.g.
Roy Hill, it is predicted that world iron ore supply
will increase by about 50 million tons. Complying
with reduction of Chinese steel industry, it is
inevitable to see a downturn of iron ore demand,
which can not be compensated by other countries
or regions over a short term. Thus over supply will
still be the condition of world iron ore market.
Average producing cost of key Chinese
miners is at high level, which nearly 2-3 times
of the same of top miners in the world, shows
weak competitiveness. China still requires
huge amount of iron ore although capacity
reduction of steel industry. Chinese market will
be served mainly by imported iron ore over a
long period of time.
In 2017, iron ore price is forecasted
to go up and then falling down. The
iron ore price is prospected to be
fluctuated between 55 USD to 90
USD. It is predicted that the average
price will be about 65 USD.
Scrap output will increase fast in 5-
15 years, which will become an
important supplement of iron ore.
2 Iron ore supply, demand and price
China Metallurgical Industry Planning and Research Institute
702 million tons in 2014
595 million tons in 2020
552 million tons in 2025
492 million tons in 2030
Chinese steel demand up to 2020 and 2030 is predicted based on analysis of down stream
industries and GDP consumption intensity. From a medium/long-term view, Chinese steel
consumption will show a peak round and descending channel, as well as fluctuation and
rebound in individual year will not be excluded.
Medium/Long-
term forecast
3 Outlook of Chinese steel industry——en era of reduction
http://www.mpi1972.com39
The subject of development of the steel industry will be changed from
increase and expansion into reduction and adjustment.
An era of reduction and adjustment with fluctuation and rebound.
China Metallurgical Industry Planning and Research Institute
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Unit: 104 t
Chinese crude steel production has been in the downturn interval of peak round. Although peak round
and descending channel have appeared, fluctuation and rebound in individual year will not be excluded.
Pig iron production presents the same characteristics, and average declining rate of output of pig iron in
long period will be faster than that of crude steel with gradual increase of scrap. From the perspective of
long term, coke and iron ore demand is in the transition period entering down going channel.
Based on the judgment that global steel consumption will maintain slight increase in the next 5~15
years, considering the impact of declining demand of iron ore in China and of increasing demand of iron
ore in other areas, global iron ore demand in the future will show a general trend of fluctuant declining,
but will still maintain at a high level.
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3 Outlook of Chinese steel industry——en era of reduction
China Metallurgical Industry Planning and Research Institute
Crude steel outputPig iron output
Scrap consumption for steel making
Scrap consumption for steel
making
Iron ore demand
3 Outlook of Chinese steel industry——en era of reduction
41 http://www.mpi1972.comChina Metallurgical Industry Planning and Research Institute
Long-term (difficulty in ten years or even longer)
Process adjustment (EAF, BOF; iron ore, scrap)
Survival of the fittest (the true powerful enterprise emerged)
Diversified operation
Innovative development (technical innovation such as internet, new energy
resources etc)
3 Outlook of Chinese steel industry——en era of reduction
42 http://www.mpi1972.com
Environmental friendly
Quality first
Differential
Diversified operation
InternationalizationIntelligent
Service oriented
Standardization
Coordination
China Metallurgical Industry Planning and Research Institute
43
4.1 Development targets
Growth of
industrial added
value
Target in the 13th Five-year Period
Crude steel
capacity (108 t)
Capacity
utilization
rate
Industrial
concentration
rate (TOP10)
Annual
growth
Pilot base of
intelligent
manufacturing
Productivity of
main business
(t steel/capita.a)
Total energy
consumption
Decreased by
more 10%
Fresh water
consumption per ton
steel production (m3)
44
4.1 Development targets
Comprehensive energy
consumption per ton steel
production (Kg standard coal)
Total pollutant emission
Decreased by more
than 15%SO2
emission
per ton steel
production
(kg)
Slag comprehensive
utilization rate
Ratio of R & D to revenue
of main business
Ratio of structural steel
to construction steel
Key indicators of
integration of
industrialization
and informatization
33% Comprehensive integrated large-scale enterprises ≥ 44%
29% Management and control integrated large-scale enterprises ≥ 42%
43% Supply-Production-Sale integrated large-scale enterprises ≥ 50%
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4.2 Main Tasks
1. Remove
overcapacity
positively and reliably
No newly-built steel capacity permitted
Remove overcapacity as per rules and
regulations.
Reduce debt ratio of steel enterprises
2. Adjust and improve
layout of the steel industry
No new
costal base
permitted.
Carry out
research on
withdraw and
replacement of
city steel plant
in Hebei
Province.
3. Improve self-independent
innovation
Establish national
innovation platform for the
steel industry.
Set up technological
innovation demonstration
enterprise.
4. Improve effective
steel supply
Promote service-oriented
manufacturing.
Improve quality.
Strengthen the brand
promotion.
5. Develop intelligent manufacturingEncourage advantageous
enterprises to try to set up
industrial internet platform.
6. Promote green manufacturing
Execute green modification and upgrading.
Promote development of circular economy.
Introduce green consumption.
46
4.2 Main Tasks
7. Promote M&A
Establish some world-class
professional enterprises in stainless
steel, special steel, seamless
stainless steel pipe industry etc.
8. Promote open policy
Promote international industrial cooperation
Improve international management level
9. Strengthen iron ore
security
Establish new supply security system
based on resources home and abroad.
Promote pricing system reflecting the
relationship between supply and
demand objectively and complying with
varied parties’ interest.
Encourage uncompetitive domestic iron ore
makers to stop production and exit the market.
10. Establish a fair
competition
environment
Comply with environmental
protection, quality control,
energy consumption and safety
regulations.
Strengthen negotiation and
self-discipline to protect from
disordered and malignant
competition.
47http://www.mpi1972.com
No newly built base in the costal area; support integrated development based on existing
base to improve quality and efficiency.
Remove inland enterprises without market competitiveness as per regional market volume
and resources security; support leading enterprises to survive.
◆ Beijing-Tianjin-Hebei & Yangtze Delta: Adjust and optimize inland enterprises by means of M
& A to eliminate excess capacity; main steel producing zone in Hebei should carry out research
on integrated exit and replacement of city steel plants based on existing costal steel base to
achieve development with reduction.
◆ Middle & Western Area; Northeastern Industrial Base: Implement regional integration to
reduce number of enterprises and eliminate excess steel capacity.
◆ Southeastern costal area: Construct high-quality costal steel base such as Zhanjiang,
Fangchenggang etc to adjust industrial layout nationwide.
◆ City steel plants: Remove steel plants with weak competitiveness and great difficulty of
modification; steel plants complying with regional development plan implement strategy of
green and harmonic development; relocation of city steel plants under progress must be
executed as per reduction principle.
4.3 Industrial layout optimization
China Metallurgical Industry Planning and Research Institute
48
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4.4 Improve independent innovation
Enterprises: main drive
Engineering companies: bridge and promoter
Universities and research institutes: pilot
Focus
Smelting technologies with
Low energy consumption
Rolling technologies with
low energy consumption and
high efficiency
Whole process quality
inspection, forecast and
diagnosis; intelligent control
technologies.
Product upgrading e.g.
high-end equipment steel
etc.
Role Key
Key producing
technologies
Key quality control
technologies
Key intelligent
manufacturing technologies
Establish national industrial innovative platform by means of
market mechanism and diversified cooperation combining
production, study, research and application to improve original
and integrated innovation.
China Metallurgical Industry Planning and Research Institute
49
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4.5 Improve effective steel supply
Promote service-oriented manufacturing:
Establish customer oriented philosophy and service awareness to promote steel enterprises changed from
manufacturer into service provider.
Steel for key
basic
components
Steel for
marine project
and high tech
ship building
Steel for
advanced
railway
transportation
Steel
for new
energy
autoSteel for
power
facilities
Key products
China Metallurgical Industry Planning and Research Institute
50http://www.mpi1972.com
Consolidate infrastructure of intelligent manufacturing
Infrastructure
1
2
3
Establish industrial internet.
Emphasize network information platform, standard
system and information security system of intelligent
manufacturing.
Establish CPS to achieve integration of product design,
resources utilization and manufacturing process in order to
carry out dynamic and timely optimization of quality, timeliness
and producing cost.
4.6 Develop intelligent manufacturing
China Metallurgical Industry Planning and Research Institute
51http://www.mpi1972.com
Establish intelligent manufacturing system of whole process
coordinated
manufacturing
Quality
monitoringEnergy cost
Establish customer-oriented intelligent manufacturing covering the whole
industrial chain to achieve further integration of industrialization and informization.
Administrative
management
Customer
serviceEstablish a coordinated system realizing
dynamic monitoring, feedback and optimization.
Data integration
platformApplication
development platformProduction
arrangement and
execution platform
Key technologies and process equipments
Materials intelligent design and optimization; on-line quality inspection; quality
inspection and on-line optimization; accurate production control; equipments
status on-line monitoring; advanced process facilities.
Establish intelligent manufacturing system covering the whole process
to achieve scale production and customized manufacturing.
4.7 Develop intelligent manufacturing
China Metallurgical Industry Planning and Research Institute
52http://www.mpi1972.com
General principle: six in one
绿色物流
4.8 Green manufacturing
China Metallurgical Industry Planning and Research Institute
Green mine Green logistics
Green manufacturing
Green procurement Green industryGreen product
53http://www.mpi1972.com
General principle: Take establishment of world-class steel power with
Chinese characteristics as the core task, formation of concentrated,
professional and efficient industrial configuration as the main orientation,
support, guide and encourage M & A of steel enterprises.
◆ Promote Cooperation centered on advantageous products
Develop competitiveness and innovative ability of varied products such as automobile plate,
electrical steel, household appliance sheet, ship building plate, pipe steel, oil pipe etc, and
encourage steel companies to remove low efficiency capacity.
◆ Guide and encourage restructuring and capacity reduction of steel
enterprises in specific regions with serious excess capacity and
homogeneous disordered competition
4.9 M & A
China Metallurgical Industry Planning and Research Institute
54http://www.mpi1972.com
4.10 Further international cooperation
Emphasize the countries along with “One Belt One Road” with better resources condition,
sufficient supporting facilities and great market potential.
Encourage advanced Chinese steel companies to go overseas to build steel producing base
and manufacturing & distribution center to push export of advanced equipments, technologies and
management.
Promote international capacity cooperation
Further international cooperation and promote trade optimization and upgrading.
Encourage advanced overseas companies to join M & A, layout adjustment etc of Chinese steel
industry by means of stock participation or holding.
Support Chinese companies to establish sale and R & D service system worldwide by means of
overseas merging, stock investment etc.
Encourage cooperation between Chinese and overseas companies to develop the third party
market to try to establish and maintain a fair and orderly steel export system.
Improve international management level
China Metallurgical Industry Planning and Research Institute
Ⅳ MPI——your reliable partner
MPI——your reliable partner
56
Consulting headquarter of
government institutions
Guide in steel industry
Brain trust of enterprises planning
Authorized qualification: MPI was established
under the approval of the State Council in1972, which is
one of the first engineering consulting institutes with First-
grade qualifications.
Excellent references: MPI has already finished
more than 5,000 projects providing service for more than
200 government departments, industrial associations, more
than 400 metallurgical companies and more than 50
overseas enterprises.
Human resources: The employees who have
obtained doctor’s and master’s degrees account for 90% of
the staff, those who have been awarded high-level
technical titles account for 70% of the staff, and those who
are state registered consulting engineers, senior
technicians or who enjoy special government subsidy
account for 50% of the staff.
57
MPI——your reliable partner
Advantages of MPI
Familiar with market situation, clients’ requirements and
development of down-stream industries
Understand government policies
Rich experience in consulting of metallurgical
industry
Energetic team with specialties covering
whole process of metallurgical industry
Strong innovative power, quick response, high efficiency
Client-oriented, wide range of contacts, integrated service
MPI——your reliable partner
Planning and
Consulting
Standardization
Intelligent
Manufacturing
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MPI——your reliable partner
Version
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Velocity
Satisfaction
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MPI——your reliable partner
Idea of Five-High-level
Excellent teamQuick response
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MPI——your reliable partner
MPI’s concepts promoting in the whole industry
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Gre
en
develo
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Ran
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g o
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develo
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Co
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d
develo
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Cap
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Overl
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thre
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tag
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ayo
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assessm
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tW
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Develo
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MPI——your reliable partner
MPI——your reliable partner
High-end forums
MPI organizes five forums such as China Steel Development Summit, China Steel Energy Saving and
Emission Reduction Forum, China Steel Technical and Economic Forum, Steel Industry Diversified
Business Development Conference and China Steel Raw Materials Summit.
2017 8th China Steel Development Summit
Time
April 12th 2017 for registration; April 13th for the Summit from 8:00 am
Venue
Beijing
Theme
Further Excess Capacity Elimination to Improve Competitiveness
Topics
—— Analysis on supply side structural reform and macro-economic development
—— Development route of further excess capacity elimination and competitiveness
improvement
—— Policies requirements of excess capacity elimination in 2017
—— Status , environment and response of steel international trade
—— Promote transformation and upgrading of the steel industry in virtue of development of
standardization and intelligence
—— Introduction of adjustment and transformation of regional steel industry
—— Experience share of advanced steel companies
—— One Belt One Road implementation supported by political financing
—— Introduction of investment opportunities of Iran, India, South Africa etc
MPI——your reliable partner
MPI’s clients
MPI’s clients
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MPI——your reliable partner
Consulting headquarter
of government
institutions
MPI undertook basic
research of preparation of
development plan of steel
industry from the 5th Five-
Year Period up to the 12th
Five-Year Period. MPI also
participated in formulation
of important industrial
policies such as
Development Policy of the
Steel Industry, Adjustment
and Rejuvenation Plan of
the Steel Industry etc. MPI
has assisted MIIT
completing the research on
formulation of development
plan of the steel industry in
the 13th Five-Year Period.
MPI——your reliable partner
Guide in steel industry: MPI takes lead in China in carrying out market investigation and medium and long
term demand forecasts of the iron and steel products. It also organizes the drafting of the Provisional
Regulations for Feasibility Study and Economic Assessment of Investment Projects in Iron and Steel
Industry and Technical and Equipment Policy for iron and steel industry.
Brain trust of enterprise planning: MPI has already accomplished over 5,000 cases of general planning
and consulting services for hundreds of large and medium metallurgical enterprises. MPI participated in
planning and research of major domestic steel projects such as Caofeidian of Shougang, Bayuquan of An
Steel, Zhanjiang of Bao Steel, Fangchenggang of WISCO etc, as well as completed five-year development
plan for many Chinese steel companies.
Specific plan helping companies to improve competitiveness
New business fields include: green development plan, environmental diagnosis, research on One
Belt One Road and going abroad of steel enterprise, further processing plan, diversified business
development plan, research on cost reduction and efficiency improvement, logistics optimization,
management improvement, intelligent manufacturing, E-commerce, mechanism reform, human
resources optimization etc.
Development plan in the 13th Five-year Period
Since the end of the 12th Five-year Period, MPI prepared strategic development plan in the 13th
Five-year Period for many steel companies such as WISCO, HBIS, Shandong Steel, Benxi Steel,
Baotou Steel, Shaanxi Steel, Valin, Rockcheck, Guizhou Steel Rope, Huinan Steel etc.
70
MPI——your reliable partner
MPI——your reliable partner
International cooperation and serviceMPI has provided such consulting service as market research, feasibility study and equipment
purchasing for Singaporean, Indonesian and China’s Taiwan and Hong Kong companies who wish
to establish joint ventures or solely foreign founded enterprises in China. MPI have provided
service and participated in the research of such projects as the construction of Zimbabwe steel
plant, Australian direct reduction iron project, Malaysia and Indonesia’s technical service. In recent
years, MPI participated actively in consulting of national development plan together with China
Development Bank carrying out site investigation in Australia, Africa, South America, CIS,
Southeast Asia etc, in order to provide reference for decision-making.
▲President Li Xinchuang had a conversation with
Cameroon mining minister.
▲ President Li Xinchuang had a conversation with
Venezuela mining minister.
MPI——your reliable partner
China Steel Series Report
China Steel Series Report is a kind of industrial consulting report sincerely prepared by
MPI on the basis of rich experience accumulated from more 1800 cases including
annual and quarterly forecast report, market analysis report of long products, plate and
pipe, as well as market analysis of iron ore, coke, non-ferrous metal and ferroalloy.
Information service
MPI provides additional information service for customers of China Steel Series Report
including monthly report, daily highlights, industrial observation etc to ensuring more
convenient and comprehensive service.
Thank you for your attention!
Address: http://www.mpi1972.com
lixinchuang@mpi1972.com
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