Global Steel Trade; Structural Problems and Future Solutions

wire rod production with an annual capacity of 700,000 MT, and plans are in place for the installation of
additional, secondary metallurgy furnaces. 48
Old Technology Phase-Out. On an industrywide basis, China intends to phase out the use of open-hearth
furnaces by the end of 2001. 49 The share of total output produced with open-hearth furnaces has dropped from
20 percent in 1990 (13.2 million MT) to an estimated 1 percent in 2000 (1.3 million MT) (Chart 6-4).
By relying exclusively on basic oxygen and electric arc furnaces, the government hopes to increase throughput
and furnace yields and improve hot metal quality. The rate of continuous casting is also increasing, which will
reduce handling and reheating costs, and increase throughput and yield. The share of output produced with
continuous casting has gone from just over 20 percent in 1990 (14.8 million MT), to an estimated 70 percent
in 1999 (85.8 million MT) (Chart 6-5). 50 To a limited extent, the government is also trying to increase the
industry’s reliance on secondary
metallurgy and automated and
computerized controls to further
120
improve metal and finished
product quality.
In general, the capital stock
of the medium-sized and large
producers that survive
consolidation will need
wholesale upgrading or
replacement. Given practical
and financial limitations, the
government has adopted a
piecemeal approach, targeting
what it views as strategically
important products, producers
and production methods.
Business Diversification:
The Korean Chaebol
Model
Company diversification is
another element of the
government’s industrial plan to
develop flexible, versatile
producers that can survive the
international steel market’s
worst conditions by having
multiple profit centers
independent of their core steel
operations. 51 According to an
OECD report, “much of the
current consolidation drive is
fueled almost exclusively by
size considerations; it rests on
the assumption that large
corporate groups, combining
Metric Tons (millions)
Metric Tons (millions)
100
80
60
40
20
0
110
100
90
80
70
60
50
40
30
20
10
Basic Oxygen Furnace
1990 1992 1994 1996 1998 2000
Source: Metal Bulletin Research/Battelle.
Electric Arc Furnace
6-4. Raw Steel Production by Furnace Type, China
Open Hearth
Chapter 6: New Players in the Global Market—China 149
Other
1990 1992 1994 1996 1998 2000
Source: Metal Bulletin Research/ Battelle.
6-5. Steel Production by Casting Process, China
Continuous
Cast
Ingot