Monday, April 13, 2009

China's runaway steel train

reportonbusiness.com: China's runaway steel train
...And that, Mr. Yu says, is the problem: Not that so many mills are going out of business, but that so many are still going.

China simply makes too much steel. The government estimates that China's annual production is about 100 million tonnes more than it should be, a figure equal to the whole annual output of the industry in the United States.

Worse, China has far too many steel companies, more than 700 at last count. Add in iron companies and companies that roll or otherwise shape steel, and the total comes to more than 7,000. Despite repeated government attempts to force them to consolidate into fewer, bigger companies, most of them are still small and inefficient.

By rights, many companies should have closed. Instead, they march on like zombies, China's industrial undead.

That was not such a problem when China was growing at 10 per cent or more a year and demand was soaring for products made in the “workshop of the world.” No matter how much steel China made and how many companies were making it, there was always a market somewhere.

Now it's a problem, and not just for China and its steel makers. In China and around the world, demand for steel is plummeting. Producers are cutting back: Japan's output fell 39 per cent and Germany's 31 per cent in February from the same month last year....


1 comment:

jessica said...

Hi,, Nice blog..Thanks for sharing informative with us...

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Jessica
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