Steel is the basic material of automobiles. Without sufficient steels, it would be impossible for auto companies and their suppliers to operate. When we visited Metalsa in Roanoke, I asked one of the executives how many steel suppliers are there near Roanoke. He said “only one”. Considering that there are many other auto suppliers and plants near Roanoke, I was worried that whether one steel company can supply enough steel for all these customers near Roanoke.
Production of steel can sometimes reflect a country’s overall productivity and economy size. United Kingdom was once the largest economy in the world, and it was also the largest steel producer as well. Then, around 1890, US surpassed UK and became the largest steel producer. After World War II, US became the largest economy in the world. In 2011, China has surpassed US as world’s largest steel producer. There are estimates that China can soon surpass US as world’s largest economy.
Production of steel is high in China due to two main factors: high domestic demand and growth of exports.
Domestic demand for steel is high due to the construction of high speed trains, large amount of infrastructure projects, and rapid shipbuildings. China is planning to construct the biggest high speed train network in the world. China is also expected to become the largest shipbuilder of the world by 2015.
Exports of steel had grown before the financial crisis. The global financial crisis in 2008 decreased foreign demand for Chinese steels. The decrease in demand forces Chinese steel companies to reexamine its strategy. Chinese steel industry is urging for changes. An article from Wall Street Journal reported that “the China Iron and Steel Association urged its members to favor higher value-added products over cheap construction steel”. Currently, low cost construction steels still are the majority of exported steels. Steel companies are planning to focus more on higher value-added products, which include automobiles. This implies that there may be another round of growth for Chinese auto industry.