<b>SteelOrbis Shanghai</b>
The National Development and Reform Commission of the People's Republic of China (NDRC) successively released three lists of enterprises in conformity with Criteria of Entry into Ferroalloy Industry in February 2006, November 2006, and March 2007. There are 462 ferroalloy manufacturing enterprises on these three lists, accounting for 29 percent of the total ferroalloy manufacturing enterprises in China. The production amounts of each of these enterprises are around 1,700 mt, covering 63 percent of the overall domestic production capacity. Among the 462 enterprises, most of them are manufacturing silicomanganese, ferrosilicon, ferromanganese, and ferrochromium products, and the rest are dealing with special alloys. According to the NDRC, if the operating rate maintains above 80 percent, then the outputs can properly meet the domestic market demand.
Against the background of vigorously developing steel industry, the global demand for ferroalloy products is in fast growth, thus great improvement has been made in the Chinese ferroalloy industry. In 2001, the total ferroalloy output only stood at 4.5883 million mt; while the 2006 output jumped to 14.332 million mt, posing an increase of 212 percent over the merely five years.
| 2001 (mt) | 2002 (mt) | 2003 (mt) | 2004 (mt) | 2005 (mt) | 2006 (mt) |
Crude steel outputs | 151,000,000 | 182,000,000 | 221,000,000 | 272,000,000 | 349,000,000 | 419,000,000 |
Ferroalloy outputs | 4,588,300 | 4,730,000 | 6,734,800 | 9,197,800 | 10,670,000 | 14,332,000 |
Ferroalloy imports | 36,000 | 93,000 | 167,600 | 405,400 | 369,800 | 616,400 |
Ferroalloy exports | 1,359,000 | 1,390,100 | 1,818,800 | 2,188,800 | 1,736,000 | 2,359,000 |
During the 2001-2004 periods, the ferroalloy industry was characterized with low investment and high return, which did attract many investors to a certain extent, leading to the quick expansion in ferroalloy outputs. In 2004, the domestic consumption demand for ferroalloy amounted to more than 6 million mt; the actual output was 9.2 million mt; while the production capability reached 19 million mt. According to the statistics of China Ferroalloy Association, in year 2006, there were more than 1600 ferroalloy manufacturing enterprises in China, with the production capacity hitting about 24 million mt, however, the actual output in 2006 was only 14.33 million mt, meaning that the average operating rate for the whole industry was lower than 60 percent. Therefore, in July 2005, Chinese Government released the Criteria of Entry into Ferroalloy Industry, aiming at impelling the concentration of ferroalloy industry, reducing blind investment, protecting the environment and improving energy saving efforts. Moreover, the three lists of enterprises in conformity with Criteria of Entry into Ferroalloy Industry also provided a list of reliable enterprises for buyers.
As regards the export, the policy does not clearly stipulate that the unqualified ferroalloy enterprises are not allowed to do exports, but their product quality usually cannot meet the requirements of overseas buyers. Furthermore, those foreign traders often require stable supply, which is also very difficult for those unqualified enterprises. In this case, China's ferroalloy export will be gradually dominated by the enterprises in conformity with the criteria.
In conclusion, the announcement of Criteria of Entry into Ferroalloy Industry is beneficial to the healthy development of China's ferroalloy industry and is also critical in the aspects of reducing environmental pollution and blind expansion. In addition, the name lists in accordance with the criteria will provide those buyers with a reliable sourcing channel.