China produced 181 million tons of steel in 2002 and 220 million tons in 2003. In 2003, China steel consumption reached record levels and it is now the largest steel market in the world. Consumption volume for 2003 reached 247.25 million tons, a 17.06% increase over 2002. The current production capacity is growing at an annual rate of 80 million tons.  In 2003, China 13 largest steel mills, each with a vast production capacity, accounted for 45% of the country's total annual steel output.  The government is seeking to consolidate small-scale mills and concentrate production in the more robust enterprises. In this regard, two leading steel enterprises from northeastern China, Benxi Steel and Anshan Steel, are said to be contemplating a merger, which will create a second steel giant with an annual output of more than 20 million tons, in addition to industry leader, Shanghai Baosteel.



Given steel's strategic importance, the Chinese government is intent on remaking the industry to achieve international competitiveness. The world's leading steel corporations are investing heavily in the China market through joint ventures and the direct import of steel and/or raw materials for steel manufacture. A typical example is a JV hot galvanized plate facility which has recently started operation in Anshan, Northeast China's Liaoning Province. The US$180-million project is funded jointly by the Angang Group Corporation, China's second largest steel manufacturer, and the Germany-based Thyssen Krupp, the second largest steel supplier in Europe. Another recent joint venture, between Shanghai Baosteel and the world's largest steel producer, Arcelor, and Japans Nippon Steel from Japan will produce cold rolled plate for the auto industry.



Chinas accession to the WTO saw the elimination of the quantity-restricting import registration system for steel imports and thus the full removal of non-tariff barriers on steel imports.  Increased foreign investment and exposure to the global economy will likely speed up the industry's modernization process, with increased flow of foreign technologies and management techniques. The largest steel companies, especially the Big Four (Baosteel, Angang, Wugang and Shougang), will strengthen in terms of size, technical prowess and market share although this would not negate the need for restructuring and technological upgrades.



The China Steel Industry Association estimates that China purchased 30 million tons of steel from the world market in 2003, a year-on-year net increase of 12 million tons. Official figures reveal that Chinese producers exported a combined 7.5 million tons of steel in 2003. This figure is widely expected to rise considerably as domestic producers seek new markets to relieve overcapacity. It will also almost certainly raise trade frictions.