Currently,
China is the biggest
steelmaking and steel consuming country in the world. Backed by huge market demand, the local steel output has broken the records again and again. However, in the longer term, some key bottleneck factors, which have already shown their influence, will restrict this increase in output. The main factors in question may be listed as follows:
Natural resources
The natural resources referred to include water, electricity and rare metals.
China is a country seriously short of water. With the national economy's rapid development, a large number of water resources including underground water, have been developed. However, due to the sharp increase in demand and high water pollution levels,
China's water resource situation has gone from bad to worse, especially in the big cities. Currently, 60 percent of
China's steel is produced in regions which are short of water. Along with the rapid increases in the local population and the development of other industries, the water situation can be expected to be more serious in the future. The same is the case as regards electricity and rare metals. With the remarkable increases in environmental costs, it is difficult to maintain the current steel output increase without sufficient natural resources.
R&D
So far, most Chinese steel enterprises do not invest enough in R&D for new products and technology. choosing instead to put the stress on
production and sales. In 2005, total R&D investment was less than one percent of yearly sales revenue among all big and middle-sized steelmakers in
China. A mere 0.79 percent of sales revenue was invested in R&D for new products. This is far lower than the average international level. Currently, there is an excess of supply of middle and low-ended steel products in the local market. As to high-ended steel products, on the contrary,
China has to import 15-20 million tons of such high value-added products every year because
China lacks
production capacity or else lacks the relevant
production technologies. If
China's steelmakers fail to invest sufficiently in R&D, their competitiveness will remain restricted as a result.
Pollution
China's practical steel capacity is currently close to 500 million tons. Of this, 30-40 percent brings high levels of industrial pollution in its wake. At present, the average energy
consumption level of
China's steelmakers surpasses the average world level by 20 percent. In addition, the energy
consumption of
China's steel industry makes up 15 percent of the total national energy
consumption. The serious pollution caused by the steel industry has reached levels that are no longer bearable. Shougang Steel's relocation out of Beijing is a very relevant example. Due to the serious air pollution caused by the mill, the government and the people in general had for many years often asked themselves, and not altogether in jest either, “Who should move out of Beijing:
China's Capital or Shougang Steel?” If the people are no longer prepared to put up with the pollution caused by the steel industry, it's going to be hard for the steel mills to exist, not to mention develop.
Furthermore, there are many other factors which have a negative influence on the steel output growth rate, such as transportation capacity, limited land availability, and so on. We may safely venture the
opinion that
China's steel output is currently close to its peak point. Thus, some planned capacities will probably just remain as figures into the future period, without having any practical meaning.