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2 - Steel in China

By Liu Jinghai¹

Part a

Introduction

Chinese iron and steel industry
Competitiveness of production cost
Steel markets
Human resources management

Vocational training
Recruitment policy
Safety and welfare

Lessons learned
Labour-management cooperation
Management style
Employee participation in policy development
Employment reform
New directions
Improving labour productivity

Strategies for productivity improvement
Lessons learned

Technology and environmental management
The role of government
Conclusions
References

Introduction

Chinese iron and steel industry

Table 1. Chinese steel industry production, 1986-96
(Million tonnes)

There are more than 1,570 production enterprises in the Chinese metallurgical industry, including many non-iron and steel producers, such as: raw materials producers (e.g. mines, refractories, machinery); institutes (e.g. universities, academies, schools); services (e.g. hospitals, kindergartens, shops and entertainment centres). In 1995 the total workforce of the metallurgical industries was 4.06 million, (11% over 1990), of which regular employees amounted to 1.39 million and contract employees 2.52 m. The total payroll was $3,960 m (211% more than in 1990). The average earnings were $977 (176% more than in 1990).

About 100 enterprises account for over 90% of total crude steel production, of which 49 are "key" iron and steel enterprises (producing 60.4 Mt in 1995), 56 are local major enterprises (28.7 Mt), plus more than ten electric arc furnace mills recently set up by local authorities. There are 24 steel mills that can produce more than 1 Mt of crude steel per year and 17 with a capacity of 0.5-1 Mt. In 1995 the total workforce of China's iron and steel enterprises was 3.157 million. Figure 1 shows employment by category of worker and figure 2 the age profile. Almost 10% of the workforce in 1995 were university graduates, compared with 5% in 1995, reflecting a general rise in educational levels. Projections are that in 2010, 50% of the steel industry workforce will be university and college graduates (figure 3).

In 1995 the total payroll for China's iron and steel enterprises was $3,130 million, equivalent to $995 per worker. Overall productivity in 1995 was 30.2 tonnes per worker up from 22 tonnes in 1990. Productivity in the modern Baoshan Iron and Steel Complex, however, was 600 tonnes.

Since the issuing of the Provisional Regulations on Institution of Labour Contract System In State-owned Enterprises in 1986 the employment system of the Chinese steel industry has changed from having all fixed employees under the centrally planned economic system towards a system of labour contracts. In 1995 workers with employment contracts accounted for 62.7% of the workforce.

Because of the important role of large and medium-size steel enterprises in the development of national and district economies, and the fact that domestic supply and demand of steel are balanced none of these enterprises has failed due lack of business or bad management. Increased competition in the domestic steel market has, however, led to some older, uncompetitive production lines, such as open hearth furnaces being closed or technically upgraded. Most workers from these lines have found jobs in the new ones, after retraining.

At the local and county level, however, increased competition has led to some small steel plants being taken over by larger plants or, in several cases, closing. By the end of 1996 four local steel mills had been declared bankrupt and other mills were close to bankruptcy.

The newly established Chinese social security system is not yet able to provide adequate assistance to all unemployed people. In order to protect workers' rights and interests the Government has decided that the assets of bankrupt state-owned enterprises should be auctioned and the proceeds first used for settling the entitlements of the enterprises' workers and the remainder for repaying debts. Moreover, other enterprises have a duty to employ workers of bankrupt enterprises before hiring other workers.

There are two kinds of workers' union in Chinese enterprises. One is the trade union and the other is the congress of worker and staff representatives. Since economic reforms, the payroll of enterprises is mainly generated from their profits of the enterprises. Since workers in state-owned enterprises are the "masters of the enterprise" there are no strikes over pay. In most enterprises the total earnings (wages and bonus) of a production worker is generally higher than that of a staff employee or a manager.

Objectives to 2005

Together with the development of a market economy system in China, the main development goals of the Chinese steel industry are to increase international competition and to meet domestic demand for all steel products.

In 2000 the production capacities will be 120-130 Mt of crude steel, 110-120 Mt of rolled-steel products, and 120-130 Mt of pig iron. The proportion of high specification, high-value steel products, such as cold-rolled coated sheets and plates, petroleum pipes, cold-rolled electrical sheet and stainless steel products, will increase rapidly. The plate and pipe rate will rise to 43%. In 2005 the production capacity will be 140-150 Mt of iron and crude steel, and 120-130 Mt of finished rolled-steel products. The plate and pipe rate will exceed 50% and exports of rolled-steel products will be over 10 Mt.

By 2000, energy consumption per tonne steel will fall to 1.28 tonnes of coal equivalent (from 1.44 tonnes in 1995), equivalent to saving 16 Mt of coal a year. The coke rate will fall to 520 kg per tonne of iron (560 kg in 1995); and coal injection will rise from 60 kg per tonne in 1995 to 100 kg. Further improvements will lead to energy consumption in 2005 of 1.1 tonnes of coal and a coke rate of 500 kg.

By 2000, 85% of waste gases will be cleaned before being discharged to the atmosphere (80% in 1995), rising to over 95% by 2005. Waste water treatment will increase from 82% in 1995 to 90% in 2000 and over 95% in 2005. Increases in the recycling of water and gasses will lead to a reduction of about 25% in pollution emissions.

By 2000, all open hearth furnaces and older steel mills will be closed, the continuous casting rate will rise from 47% in 1995 to 80% in 2000 and over 90% in 2005. The proportion of alloy steel will increase from 20% in 1995 to 50% in 2000 and over 70% in 2005, and the continuous rolling rate will rise from its current level of 30% to 60% in 2000, and over 85% in 2005. All steel production will meet advanced international standards.

Labour productivity will rise from 30.3 tonnes of crude steel per worker per year in 1995 (21.9 tonnes in 1990) to 100 tonnes in 2000. That in large steel complexes will rise to 300 tonnes, with some of them reaching 500 tonnes per worker per year.

Competitiveness

Technical situation of the industry

The main steel-producing regions are North China (36.5%), East China (23.1%), Northeast China (14.3%) and South China (13.6%). Figure 4 shows several technological indicators between 1985 and 1996. Two-thirds of steel is produced in BOFs, with EAFs and OHs accounting for 23% and 12% respectively. In recent years technical advances have led to a fall in energy consumption per tonne of steel has fallen from 2.52 tonnes of standard coal in 1978 to 1.44 tonnes in 1995. The proportion of finished rolled-steel products in crude steel output has risen from 69% in 1978 to 87% in 1995. The continuous casting rate has risen from 3.5% to 46.5% and the percentage of alloy steel in total production has risen from 8.5% to 21%. Figure 4 shows indices of technological progress since 1985.

In 1995 China produced 261.9 Mt of iron ore, which was 76% of the industry's requirements; 41 Mt were imported. There are over 40 blast furnaces with a volume exceeding 1,000 m3 (those at Baosteel are all over 4,000 m3). However, the average blast furnace volume is only 100 m3 compared with 2,000 m3 average in advanced steel-producing nations.

The steady progress of steel-refining and continuous casting has been accompanied by the installation of larger converters. Also, ten modern EAF production lines have been set up. In the large and medium-size steel enterprises over 30% of production is alloy steel and the continuous casting rate is over 50% -- but still below the ratios in advanced steel-producing nations.

Continuous rolling has risen greatly in recent years, with rolled- steel products increasing from 82.5% of crude steel production in 1990 to 85.5% in 1995. Once again, however, the rate in advanced countries is already over 90% and most rolling lines are continuous.

Long products still account for the bulk of production, although the output of steel plate and pipes is increasing quickly, reaching 37 Mt in 1996, accounting for 44% of total finished rolled products, compared with 32% in 1973 and 60% in advanced steel-producing countries. The output of steel products that are important for China's economic development has increased markedly (table 2). In the large and medium-size steel enterprises, which account for over 85% of the total steel production, 76% of finished steel products are processed under international advanced standards. In key enterprises it is 82%. There is a big difference in the variety and quality of finished steel products between China and other major steel-producing countries.

Table 2. Output of finished steel products, 1990-96

(Million tonnes)

¹ Ministry of the Metallurgical Industry, Beijing.

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