Abstract
The landscape of the steel industry has changed significantly since the start of the twenty-first century. The countries of the Organisation for Economic Co-operation and Development (OECD) have played an active role in the global steel industry. However, in the past decade, non-OECD countries have also caught up with trends. Non-OECD countries have developed from peripheral players to major centres of global steel production and trade, and they should continue to play a crucial role in the global steel market as a result of steady capacity additions. In addition to changes in the composition of the global steel market, there has been a gradual change in the structure of production technologies in the global steel industry. With the increasing importance of the electric arc furnace (EAF) route, does the blast furnace/basic oxygen furnace (BF/BOF) route still play an important role for non-OECD countries to catch-up with OECD countries? This study provides an in-depth analysis of non-OECD countries’ steel production and trade, and the results indicate that the balance of steelmaking technologies is associated with steel trade structure in non-OECD countries. The BF/BOF route is more likely to be significant for non-OECD countries to become net exporters of steel and diversify and/or to upgrade exports of steel products.
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Notes
The OECD had 35 member countries as of April 2018. Abbreviated names of the countries are available in Appendix Table 6.
Figures for production and trade in this study are taken or calculated from the World Steel Association (2017) and the International Steel Statistics Bureau (ISSB 2017), unless otherwise indicated. Rankings of crude steel output for OECD and non-OECD countries, crude steel output by processes data, and key steelmaking raw materials data are available in Appendix Table 7.
Chinese steelmaking capacity increased significantly from 149.6 million metric tonnes (mmt) in 2000 to 1119 mmt in 2016, according to data from Wirtschaftsvereinigung Stahl (2017).
Currently, India is the second largest steel producer among non-OECD countries and the world’s third biggest steel producer, but the country is expected to become the world’s second largest steelmaking country in the future, since the Indian Government is aiming to increase its steelmaking capacity to increase from 122 mmt in 2015–2016 to 300 mmt in 2030–2031 (Ministry of Steel 2017). Aside from India, Iran is aiming to expand its steelmaking capacity to 55 mmt by 2025 (Imidro 2016). Among the Association of Southeast Asian countries, Vietnam’s government plans to increase steelmaking capacity to 66.2 mmt by 2035 (Ministry of Industry and Trade 2016), while Indonesia is targeting an increase of capacity from 11.2 mmt in 2016–2017 to 50 mmt in 2021–2035 (Indonesian Iron and Steel Industry Association 2017).
According to Gerschenkron (1962), a late-starting industrial country may be able to enjoy faster growth than an advanced country, by importing existing technology from abroad, instead of developing its own technology, since doing so could save time and costs.
However, this does not apply to some countries. For example, Australia has been a major exporter of natural resources, although the country is a high-income OECD country.
There are also integrated mini-mills with plants for using direct reduced iron (DRI) plants, EAFs, and rolling mills.
Mini-mills, based on the EAF route, are generally smaller and simpler to construct and operate than integrated mills based on the BF/BOF route, and hence, the name ‘mini-mills’ (World Steel Association 2013b).
In the case of South Korea, POSCO and Hyundai Steel are classified as integrated mills, while Dongkuk Steel is regarded as a mini-mill. Hyundai Hysco was a South Korea’s re-rolling mill, although Hyundai Steel acquired Hyundai Hysco in July 2015.
The DRI process can also be used in the EAF route.
For example, Brazil can produce at low cost using high-quality Brazilian ore.
For instance, POSCO has operated five of the 14 super-sized BFs in the world, including the world’s largest—Gwangyang BF no. 1 (6000 m3), Pohang BFs no. 3 and 4 (5600 m3), and Gwangyang BFs no. 4 and 5 (5500 m3) (POSCO 2017).
It should be noted that the Indian steel industry is characterised by the existence of a large number of small steel producers that utilise DRI plants (Ministry of Steel 2017). The DRI route has played a crucial role in India and the country has been the world’s largest DRI producer, although the BF route has larger ironmaking production capacity than the DRI route in the country (Ministry of Steel 2018). In India, large steel firms (e.g. Tata Steel and Steel Authority of India Limited) produce steel through the BF/BOF route, while other major steel producers (e.g. Essar Steel and Ispat Industries) employ DRIs/EAFs (Mandal and Sinha 2013).
For instance, PT Krakatau POSCO formally began operating its first blast furnace in December 2013 in Indonesia. PT Krakatau POSCO’s integrated steel mill project was part of Indonesia’s economic development acceleration master plan, called the Master Plan for the Acceleration and Expansion of Indonesia’s Economic Development (MP3I), which emphasises connectivity in the country (Government of Indonesia 2011). In Vietnam, Formosa Ha Tinh Steel Corporation fired up its first blast furnace in May 2017 and the second one in May 2018. The BF/BOF route is expected to continue to increase, supported by new investment projects that are iron ore/coking coal-intensive (Ministry of Industry and Trade 2016). In addition, Alliance Steel (M) Sdn, a China-invested greenfield integrated steel project in Malaysia, fired up its first blast furnace in March 2018 and the second one in July 2018, which is likely to impact the balance of steelmaking technologies in the country.
Other steel products range from wire to steel castings.
For example, Chien and Hu (2007) analysed renewable energy and macroeconomic efficiency with the dichotomy between OECD and non-OECD countries.
POSRI (2016) uses the ESI to analyse the competition of steel exports between Asian countries.
The results of the correspondence analysis are displayed in Appendix Table 9.
Data for 2008 were the oldest data provided by the ISSB (2017).
Detailed steel export data for the OECD are presented in Appendix Table 10.
ESI values for OECD countries are individual OECD countries’ values vis-à-vis the aggregate OECD.
It is important to note that India’s share of crude steel output via the BF/BOF route is relatively high compared to other EAF-oriented non-OECD countries, accounting for 42.7% of its total crude steel output in 2016.
It would be important to explore the reasons for the differences between the first and the third cluster. It is important to shed light on the volume of crude steel output, given the variable could have significant implications for steel export structure. Appendix Table 13 shows crude steel output of four clusters in 2016. These four clusters were analysed using the Kruskal–Wallis test and Steel–Dwass test. The Kruskal–Wallis test showed that crude steel output was significantly different (p < 0.001), and the Steel–Dwass test indicated that there was a significant difference between the first and the third cluster (Appendix Tables 14 and 15). Although both countries in the first and the third cluster are BF/BOF-oriented countries, there appears to be a significant difference of economies of scale owing to the magnitude of crude steel output. Since non-OECD countries in the third cluster are major steel producers, there are also discrepancies with other clusters in crude steel output.
The BF/BOF route has been a major technology globally, accounting for 73.8% of global crude steel output in 2016.
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Acknowledgements
The author is extremely grateful to three anonymous referees for invaluable comments and suggestions in this study. The author would also like to thank Professor Nozomu Kawabata of Tohoku University for his insight and guidance.
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Sekiguchi, N. Steel trade structure and the balance of steelmaking technologies in non-OECD countries: the implications for catch-up path. Miner Econ 32, 257–285 (2019). https://doi.org/10.1007/s13563-018-0163-x
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DOI: https://doi.org/10.1007/s13563-018-0163-x