CHINA'S IRON AND STEEL INDUSTRY By ALFRED H. USACK, JR., and JAMES D. EGAN 1. China: Major Iron and Steel Resources and Facilities- TABLES Page 264 265 266 268 270 272 273 273 274 277 278 278 278 280 282 284 285 267 1. China: Production of Iron Ore, 1949–74_ 2. China: Estimated Requirements for Coal and Coke by Iron and Steel Industry, 1949–74. 3. China: Scrap Steel, 1949-74. 4. China: Production of Pig Iron, 1949–74_ 5. China: Production of Crude Steel, 1949–74_. 6. China: Foreign Trade in Iron and Steel Products, 1950-74.. 269 271 273 275 276 279 7. China: Production and Consumption of Finished Steel, 1949–74_. 283 285 I. SUMMARY AND CONCLUSIONS In its first 25 years, the People's Republic of China has made rapid progress in developing the key iron and steel industry. With the help of the Soviet Union, a number of large iron and steel bases were developed in the 1950's. Since then, advances have been made on the basis of China's own efforts and selective help from non-Communist countries. Some new technology has been introduced--particularly the basic oxygen furnace which has increased production efficiency-and the quality and variety of steel products have improved. Annual production of crude steel is now in the neighborhood of 25 million metric tons, making China the sixth largest producer in the world. China has the potential for a much larger iron and steel industry. Three factors have been holding back development: China's domestic resources of iron ore and coal, although plentiful, are of a low quality and must be given special treatment. Beneficiation technology, now in use in foreign countries, will enable the PRC to treat native materials and to ultimately operate a large steel industry entirely on its own resources. However, China has been very slow to invest in beneficiation. This has seriously retarded iron production capabilities. The Chinese had not yet trained a fully competent work force when the Soviet technicians were withdrawn in 1960. They still lack the organizational and technical expertise to provide a balanced structure to the industry and to develop new techniques on their own. Technical assistance has been provided by Western countries and Japan but the unwillingness of the Chinese to accept large numbers of foreign technicians has reduced its effectiveness. Capital shortages in the general economy have led to imbalance in the iron and steel industry. For example, the mining sector has been allocated a minimum of capital forcing it to operate in a labor-intensive fashion. That was adequate while the industry was small but the industry has grown until the demand for ore cannot be met without an infusion of capital. In fact, substantial amounts of iron ore and pig iron have been imported in recent years to meet demand. Finishing facilities also have not kept pace with crude steel output, and a large tonnage of finished products must be imported. The Chinese are moving to correct these deficiencies, mostly through imports of modern capital equipment. Mining and ore beneficiating equipment and a large steel finishing facility have been purchased in the last few years. Installation of this equipment will take several years, and demand for steel products will meanwhile continue to rise. Therefore, the present imbalances probably will persist through the 1970's, with output rising at only a moderate rate. Beyond 1980, progress in the industry will depend on how rapidly the PRC improves its own capability to produce the needed machinery and equipment and how willing it is to devote large amounts of foreign exchange to pay for steelmaking equipment and technology. II. INTRODUCTION Although the Japanese and West Europeans had built iron and steel plants in China, most of these were damaged or destroyed by the time of the Communist takeover in 1949. More important, the facilities had been built and managed by outsiders, so the Chinese had practically no experience when they undertook the task of building an integrated iron and steel industry. The USSR provided a lot of help in the 1950's but the premature withdrawal of Soviet technicians in mid-1960 set the Chinese back a number of years. Since 1960, Mao's great political and social campaigns have continued to interfere with development of the industry. Analysis of the industry is complicated by a dearth of information, especially since 1960. We are particularly short of solid information on the extent of resources and their development. Before 1958, Peking released statistics on most economic sectors in various publications but nowhere provided a comprehensive set of statistics or precise definitions of the statistics presented. The exaggerated statistics of the Leap Forward era (1958-60) help to confuse the picture. Output during this period, especially the product of the small plants, simply is not comparable in quality to output before or after. The Chinese con 51-174 O-75 - 18 tinue to refer to the production statistics reported in the 1950's, and any attempt to reconstruct Chinese series must take these figures into account. Practically no statistical information on the economy, including the iron and steel industry, was released in the 1960's. Since 1970, the Chinese have announced a few national statistics for steel which have helped to clarify general trends in the industry. This paper describes the development in the industry since 1959 and provides a number of statistical series. It also discusses problems the Chinese have in expanding and modernizing the industry and the alternatives available for solving these problems. Because raw material problems are particularly significant, we have devoted the first section to their discussion. After a historical section, we then discuss the main components of steel production and the problems of balanced growth. Comments on prospects for the next few years complete the main text. An appendix describes the principal iron and steel plants in China. Abbreviations used in the footnotes in this paper are: The People's Republic of China has large resources of the basic raw materials needed to become one of the world's largest steel producers. Coal, iron ore, and limestone are found in widespread areas the only deficit area being southeast China. Large deposits of important alloying materials-manganese, molybdenum, vanadium, and tungstenalso are available (see figure 1 for the distribution of major resources). Resource weaknesses include the inferior quality of much of the coal and iron ore and the dependence on imports for a large part of requirements for cobalt, chromium, nickel, and steel scrap. Organizational and technological weaknesses have exacerbated China's resource problems. In the 1950's, in their haste to increase production rapidly, the Chinese failed to survey potential resources fully and major plants were built in areas where resources were scarce. For example, the large plant at Pao-t'ou was built at a location far away from suitable supplies of coal. Inefficient organization and management led to waste of resources and capital. Some sectors of the industry grew slower than others, causing severe bottlenecks. Ore beneficiation in particular was neglected despite the poor grade of Chinese ores. Shortages of iron ore held back production of pig iron and the poor quality affected efficiency of operations. And, delays in completion of steel finishing facilities postponed full utilization of steel production capacity. Iron Ore The PRC has large deposits of low-grade iron ore and a few small deposits of high-grade ore. No precise quantification of these deposits, based on an objective up-to-date survey, is available. Published figures range from the pre-1949 estimate of 2 billion tons to the fantastic claim of 100 billion tons made by the Chinese during the Great Leap Forward. In any event, reserves are sufficient for continued exploitation well into the 21st century. Nearly all the major iron mining areas are located north of the Yang-tse. Deposits now being worked include those surrounding the An-shan Iron and Steel Plant in Liaoning, the mines northwest of Peking, the mines in the Pai-yun-o-po area north of Pao-t'ou, and the mines near Ta-yeh and Ma-an-shan in the Yang-tse valley. Numerous other iron ore deposits exist; the potential output from ore bodies in Kansu, Kweichow, southern Szechwan, and Kwangtung is especially great. Vast areas in China's hinterland have not been surveyed for mineral resources of any type. Even if rich iron discoveries were made in the near future, several years and generous doses of capital would be needed before the industry would benefit. Since 1952, the average grade of China's domestically mined iron ore has generally fallen. The industry has had to turn increasingly to deposits of low grade ore in order to increase production. During years of normal growth, Peking has emphasized exploitation of high-grade ore deposits and the average iron content has usually run over 40 percent. This appears to have been the case during the rehabilitation period of the early fifties and the retrenchment period of the early sixties. In times of rapid expansion-for example, the Leap Forward (1958-60) and the early 1970's-the average grade falls well below 40 percent iron content. Table 1 provides details. |