FOCUS: China continues world steel dominance by boosting offshore assets

China is expanding its global steel presence by pumping more investments into overseas assets.

Other than its domestic and export prices leading global steel trade, its investments in steel mills around the world let Chinese steelmakers have a physical presence overseas - especially in developing countries where steel demand per capita is expected to continue growing.

The latest Chinese investment is a 2 million-tpy steel mill in Zimbabwe, Africa, after officials from Zhejiang signed a $1 billion memorandum of understanding (MoU) at the Zimbabwe-China Business Forum this week. It will be headed by a subsidiary of Chinese steel producer Tsingshan Holding Group.  

Major Chinese producer Shaanxi Iron & Steel is planning a 10.5 million-tpy steel operation in Indonesia, including a 7.5 million tpy steel mill and a Shaanxi Steel Industrial Park, which will produce 3 million tpy of flat and long steel.

Tsingshan Group started operations at its Morowali stainless steel plant in Indonesia in June 2016. It is actively producing hot-rolled (HR) stainless steel at its two plants in Indonesia and is exporting the product mainly to other Asian countries. Tsingshan’s Indonesian mills have total capacity for 2 million tonnes per year.

The company has also formed a joint-venture company in India - Cromo Steels Private Ltd Co (formed with unspecified partners) - to construct a 150-billion-rupee ($2.3 billion) integrated plant with both hot- and cold-rolling lines. The facility will have crude stainless steel capacity of 2 million tpy, while the CRC capacity will be 600,000 tpy.

Guangxi Shenlong Metallurical Co and Guangxi Beibu Gulf Port International Group Co started up Alliance Steel in the Malaysia-China Kuantan Industrial Park earlier this year, with a total capacity of 3.5 million tonnes of high-speed wire rod, bars and H-beam.

These investments also support China’s ‘One Belt, One Road’ initiative, where the world’s single largest steel producing country is pledging billions of dollars to build large-scale infrastructure connecting it to 68 countries in Russia, Europe, the Middle East, Africa and Asia. In turn, it expects to boost economic and trade ties with recipients of these infrastructure projects.

And steel mills fit right in the picture by producing the crucial steel building and construction materials to feed the overwhelming number of infrastructure projects.

Major iron ore produce BHP said projects worth at least $1.3 trillion have been initiated, and this could lead to up to 150 million tonnes of incremental steel demand, out of which 80% would be used in structural and reinforced concrete, with the remainder going to produce machinery and equipment.

This would mean an additional 15 million tpy of steel demand in areas where the One Belt, One Road projects are being constructed. BHP  said that power, railways, pipelines and transport projects will account for up 70% of this demand.

The money China is pumping into steel mills around the world will satiate this appetite.

Other than bolstering trade ties with regional economies, China’s overseas steel plants also allow it to sidestep anti-dumping or blanket tariffs currently being introduced by major steel-producing countries including China itself, the United States, Europe and Japan.

China is facing a multitude of tariffs globally, including hot-rolled steel piling and steel ropes and cables in Europe, welded pipes in Colombiacast iron pipes in Brazilrod in coil in Australia, as well as an entire suite of steel products in Taiwan.

However, while anti-dumping and countervailing duties make it costlier for buyers to import China-origin steel, if the product is produced in local plants it does not command any additional tariffs - especially if it is produced in a ‘special economic zone’ demarcated by the local government as ‘tax-free’ to facilitate trade, investment and job creation.

Paul Lim

paul.lim@metalbulletinasia.com

Published

Paul Lim

June 13, 2018

10:35 GMT

Singapore