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Growth potential of the industry



Growth of the Chinese steel industry appears to be staggering. However, when one considers that China has a population of 1.3 billion, the per capita steel consumption is around or below that of the developed countries. Indeed, while China has been progressively raising steel production for many years, it has also been importing substantial quantities of steel. It is only now that China has become a net exporter of steel. This indirectly means that China has also reached a level of production saturation and its steel industry is more likely to witness more of consolidation and reorganisation in coming years rather than any major expansion of its assets.


 


Amongst the other developing countries, South Korea has stabilised at around 46-48 million tonnes, and Brazil at around 30 plus million tonnes. This brings the focus of the industry to India. Considering a steel consumption of 300 kg per man per year to be a fair level of economic development, India will have to come up to somewhere around 300 million tonnes, if it is to fulfil its ambitions of being a developed country. That of course is a long journey from the present production level of around of around 40 million tonnes but one must consider its past before coming to a conclusion about its potential. India was producing only around a million tonnes of steel at the time of its independence in 1947. By 1991, when the economy was opened up steel production grew to around 14 million tonnes. Thereafter, it doubled in the next 10 years, and then it is doubling again, maybe over a slightly longer span.


 


In the developed countries, the trend is on consolidation of industry. Cross-border mergers have been taking place for several years. The focus is on technological improvements and new products.


 


Globally, the steel industry became a billion tonne industry in 2004. How much more it will grow will depend primarily on how much more steel is consumed in the developing countries.


Reduction in workforce

Steel is no more the labour-intensive industry it used to be. Earlier, it was often associated with the image of huge work force living in a captive township. All that has changed dramatically. A modern steel plant employs very few people. In South Korea, Posco employs 10,000 people to produce 28 million tonnes. As a thumb rule, one can put the direct employment potential at 1,000 per million tonnes. It could be less. However, steel being a basic industry, it generates substantial growth of both upstream and downstream facilities. According to some estimates one man-year of employment in the steel industry generates 3.5 man-years of employment elsewhere. Considering all these, total employment generation will be substantial.


 


The third quarter of the twentieth century, the post War years, witnessed massive growth of the global steel industry. Annual production rose more than three times in 15 years from 1960. The steel industry grew on the strength of human beings – the great steel men. It was a glorious period for the men behind the wheels in the humming steel plants.


 


Then in the last quarter of the century, production reached a sort of plateau and rose only by around 100 million tonnes. Increase in production gave way to increase in productivity. Technology reigned supreme. The tables were turned against the steel men. In some countries it had started earlier, others followed and swelled the tide. The highly skilled and dedicated human beings, who were producers of the metal that was the strength of nations, were no more required. Economies of scale made an impact. Automation had done the magic. Computers had taken over! The dehumanisation of the steel industry had been initiated in a big way.


 


During the period 1974 to 1999, the steel industry had drastically reduced manpower all around the world. In USA, it was down from 521,000 to 153,000. In Japan, it was down from 459,000 to 208,000. In Germany, it was down from 232,000 to 78,000. In UK, it was down from 197,000 to 31,000. In Brazil, it was down from 118,000 to 59,000. In South Africa, it was down from 100,000 to 54,000. South Korea already had a low figure. It was only 58,000 in 1999. The steel industry had reduced manpower around the world by more than 1,500,000 in 25 years!


 


Well, you cannot stop the march of science and technology. With all the hue and cry, the world has adjusted to it.

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