Iron Ore and Chinese Steel Industry

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FACTSHEET

Steel,
aluminium
and
the
carbon
targets

2010—2050


The
structure
of
the
steel
industry 

The
steel
industry
consists
of
a
large
number
of
producers
with
an
international
reach.
In
2007,
1.34
bn
t
of
steel
 were
produced
which,
together
with
iron,
accounted
for
65%
of
the
$1,594
billion
global
metals
and
mining
market.



 
 


 
 Iron Ore 
 
 Mining
Industry

Coke Direct Reduced Iron Pig Iron

Project
finance,
brokers,
 traders
&
exchanges
 
 
 
 



 Steel
Industry
 Secondary steel production EAF

Stockholders


Primary steel production BOF

Standardised steel products

Construction Industry Automotive Industry Railway Industry Shipbuilding Industry Chemical and Petroleum Plants Other

Specialist steel products

Finished products and equipment



 







 B Equipment,
transport
 




















Recycling
Industry
 &
support
services





1 2 2 3 3

Figure
1
The
steel
supply
chain



Since
the
invention
of
the
Bessemer
process
in
 1856,
steel
has
become
a
choice
building
material
 across
the
globe,
sought
after
for
its
advantageous
 qualities
‐
hardness,
ductility,
durability
and
tensile
 strength.
As
a
result,
demand
for
steel
has
became
 synonymous
with
industrial
development,
not
least
 today,
when
the
growth
of
the
so‐called
BRIC
 countries
(Brazil,
Russia,
India
and
China)
is
by
far
 the
greatest
influence
on
the
market.

 particulars
of
the
production
process.
Both
steel
 and
its
majority
input,
iron
ore,
are
produced
in
a
 highly
capital‐intensive
manner.
Their
production
 involves
long
lead
times
and
increasingly
 continuous
processes.

The
resultant
rigidity
in
steel
 supply,
coupled
with
the
highly
cyclical
nature
of
 steel
demand,
have
meant
that
certain
key
decisions
 within
the
industry
are
made
by
coordinated,
 administrative
processes
as
opposed
to
pure
 market
forces.

 For
example,
iron
ore
prices
are
negotiated
 annually
at
meetings
between
the
steel
and
the
iron
 ore
industry.
Future
demand
is
also
discussed
at
 these
meetings
with
a
view
to
avoiding
situations
of


Strategic
industry

The
steel
industry
is
often
referred
to
as
a
“key”
or
 “strategic”
industry.
This
is
not
only
because
of
its
 importance
for
development
and
because
of
the
 Julian
M
Allwood,
jma42@cam.ac.uk
 Department
of
Engineering,
Trumpinton
St,
Cambridge
CB2
1PZ


over/under
supply.
The
need
to
improve
the
steel
 industry’s
bargaining
power
at
these
meetings
is
 part
of
the
motivation
for
increased
consolidation
in
 the
sector
since
the
mid
90s
(2).
Another
example
of
 coordination
is
the
European
Coal
and
Steel
 Community,
a
precursor
to
the
EU
and
operational
 for
the
50
years
from
1952.
As
well
as
acting
to
 prevent
protectionism,
this
body
received
 information
and
offered
comment
and
advice
on
all
 sizeable
investments
made
by
the
sector
within
the
 Community
(3).
Full
scale
centralised
planning
of
 the
steel
sector
occurred
in
China
until
the
1970s
 and
the
state
has
continued
to
have
a
significant
 influence
on
the
industry
since
piecewise
 privatisation
has
been
encouraged
(4).


their
earnings,
capitalise
on
cheap
production
 capacity
and
take
advantage
of
economies
of
scale
 (2)
.
The
need
to
secure
access
to
input
markets
and
 the
availability
of
cheap
credit
(while
it
lasted)
have
 also
been
key
influences
on
M&A
activity.
Whilst
 most
of
these
motivations
have
waned
in
the
face
of
 the
global
financial
crisis,
pressures
from
the
 Chinese
government
will
likely
see
further
 consolidation
in
the
industry
(4).
 Despite
this
trend
towards
globalisation
and
 consolidation,
the
industry
remains
fairly
 fragmented,
with
a
large
number
of
producers
 operating
with
an
international
reach.
The
top
10
 global
steel
producers
together
account
for
27%
of
 production,
with
the
single
largest
producer
–
the
 recently
formed
ArcelorMittal
‐
accounting
for
8%
 of
production.
The
fragmented
nature
of
the
 industry
increases
competition
for
inputs
and
...
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