Apr 8 2004
China is the world's largest steel producer. Its economic explosion demands more, and the country is bidding up the world price of this essential ingredient.
The number two through 10 producers of steel are Japan, the U.S., Russia, South Korea, Germany, Ukraine, India, Brazil, and Italy.
Chinese steel producers are striking deals with foreign suppliers to ensure steady sources for increasingly scarce materials such as iron ore, needed to make basic carbon steel, and nickel, which is used to make stainless steel.
One Chinese steel producer is planning to build a steel mill in Brazil that would ship its products back to China.
The moves come as China considers other ways to lock in the materials it needs to fuel its booming economy. Its demand has boosted prices for everything from energy to rubber, but some raw materials—notably petroleum and iron ore—are in short supply within its borders. China's energy industry has sought to buy stakes in overseas oil reserves, especially in the Middle East, though with limited success so far.
Currently, China is the world's largest steel producer, with a 30% share of global production. Its production will grow about 19% this year, with 16 blast furnaces under construction. But it is also the world's largest steel consumer, because of increased purchases of washing machines, refrigerators, and cars, as well as the building of facilities for the 2008 Summer Olympics in Beijing.
One deal made in recent months will supply China's steelmakers with iron ore from North America. A shuttered Minnesota mine was reopened late last year under a new ownership agreement between Chinese steelmaker Laiwu Steel Group Ltd. and Cleveland-Cliffs Co., an Ohio mining company. The two companies agreed to buy EVTAC Mining Co., which had filed for Chapter 11 bankruptcy court protection and had fired about 400 workers. Laiwu holds a 30% stake, while Cleveland Cliffs owns 70% in the operation, now called United Taconite.
China is pressing on to other areas, including Australia and South America. In Australia, four Chinese steel mills reached a tentative agreement with BHP Billiton Ltd., one of the world's largest producers of iron ore, to provide 12 million metric tons of ore annually over the next twenty-five years for $9 billion. The four Chinese steel mills will each get a guaranteed supply of iron ore from BHP's Jimblebar mine in Western Australia during the contract period.
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