[ad_1]

On paper, China is at war with excess steel production. Over the past two years authorities have cut millions of tonnes of capacity while the country’s most steel-intensive regions ordered mills to halve their output during winter. 

Yet at the Jianlong steel mill in Shanxi province, steel workers complain they spent the season working overtime. “I have been doing 15-hour shifts at least once a week this winter,” grumbled a steelworker who gave his name only as Wang, and who has worked at the mill for the past decade. 

Despite the severe seasonal cutbacks, China’s crude steel production increased by 6 per cent year-on-year in the first two months of 2018, and 2017 was a record year for steel production in the country. 

That increase could exacerbate already tense trade relations between the US and China. In March, the US announced global steel tariffs aimed at what it sees as China’s flooding of global markets with cheap steel.

Any excess Chinese steel production is likely to be exported into smaller countries. China’s steel sector is so big that even an increase of just 1 per cent in exports would equal the entire export market for US steel mills. 

The increase also illustrates the difficulties that Chinese authorities face as they attempt to slim down the country’s inefficient heavy industry sectors, including steel.

The official caps on output were intended to ensure cleaner air around Beijing this winter. Unintentionally, they have simply caused production — and pollution — to move to those parts of country where caps are not imposed. 

Limits on production imposed in 28 cities and regions, including in and around Beijing, have brought more business to once-fringe steel producers. The north-eastern province of Heilongjiang saw an 84 per cent year-on-year jump in crude steel output in January and February. The south-western province of Yunnan saw a 54 per cent increase. Neither are known for steel production. 

Factories near the capital also ramped up production last year in anticipation of the caps — imposed in November 2017 — according to Lauri Myllyvirta, a Beijing-based coal campaigner for Greenpeace. “The broader problem is high reliance on highly polluting smokestack industries and credit stimulus to hit GDP targets,” he said. “Until that problem is solved, the fight against air pollution will have an element of whack-a-mole.” 

Beijing’s efforts to clean the air in the capital have forced heavy industry to move elsewhere, such as the Jianlong mill in Shanxi’s Yuncheng city, located on the edge of China’s steel and coal heartland. Yuncheng conveniently falls outside the scope of the production curbs imposed on other Shanxi cities. 

Only 150km north of Yuncheng is Linfen, once one of the most polluted cities in China because of its heavy coal and steel production. The city voluntarily complied with regional production cuts, which are aimed at reducing airborne pollution. 

Yuncheng has not gone the way of Linfen. “I see workers leave [the neighbourhood] gates at 7.30am and return at noon the next day,” says Zhang Hai, the owner of a restaurant in the residential area across the street from the Jianlong mill. “Everyone has been working overtime shifts this January and February.” 

The 50m tonnes in steel capacity cuts last year contributed significantly to the overall upswing in production. Much of last year’s record output was the result of melting down scrap seized during the closure of smaller, sometimes illegal, furnaces, which have constituted the bulk of capacity cuts. This had the effect of putting illegal steel production, not counted in government data, into official output figures. 

“Producers put the scrap in blast furnaces, which leads to greater output,” says Xu Zhongbo, president of Beijing Metal Consulting, a private consulting group. “In areas not constrained by mandates to decrease production, mills produced more.” 

Rising prices for steel products further incentivised production and brought the tentative return of prosperity to Yuncheng. Steel workers say that since last year they have received a monthly bonus of Rmb200 to Rmb1,000 ($32 to $160) on top of their monthly base salary of about $450. 

Steel prices stayed high through this winter thanks to a buoyant property market and infrastructure development. 

The large volume of supply from illegal mills removed from markets last year also drove up prices — welcome news for steel enterprises, which are often crucial employers in the region and are pressured to keep jobs no matter what the cost. 

The Jianlong mill is one such case. Once named Highsee Steel, it went bust in 2014, leaving almost 10,000 workers idle. In 2016, the mill was acquired by the Jianlong Group, a private conglomerate that is one of the largest private steel producers in Hebei, the province most heavily affected by output limits and which adjoins Shanxi. 

By buying Highsee Steel, it has been able to cushion production cuts in Hebei. Jianlong Group did not respond to a request for comment but a steelworker said the new owners had streamlined operations. “Where there were once three people working on a single thing, now there are two people,” said the worker, who gave his name only as Feng.

Yet slower predicted growth in China’s property and infrastructure this year, as well as rising scrap prices, could dampen the steel boom. An FT poll found that China’s expected steel output rise was just 0.6 per cent for 2018, down from 5.7 per cent the year before. 

In Yuncheng the mood is optimistic. “Many of Jianlong’s steel workers live in my village and they said business was good again,” said a restaurateur who was opening a noodle outlet outside the mill’s gates. “A few years ago, this place was deserted. Now people are coming back.”

Follow Emily Feng on Twitter @emilyzfeng



[ad_2]

Source link

If you are looking to make money from running your own business at home, visit the links below.

Computers and Software Buyers Guide

Compare Computers and Laptops

Mobile Phones Buyers Guide

Compare Mobile Phones