6.3.4 The Metallurgy Industry

Metallurgy Industry is defined as the metal/mineral and metal-related industries. China, in this case, has been renowned for its material (metal/mineral) resources and production. This industries alone accounts for over 8 % of the total industry output value and over 30 % of the whole natural resources/mining industry output value.

Overview

The metallurgy industry is one of the most important sections of China’s materials industry.  It accounts for over 8 percent of the total industrial output value. It also accounted for one-third of the output value of the mining and raw materials industries. Between 1949 and 1980, 300 million tons of rolled steel and non-ferrous metals were produced.

China’s metal resources were distributed over a wide area, including a relative concentration of different ores. The development took place mainly along the coast, with some development in the interior. The industry is most developed in the east and northeast China, followed by the north and central-south; the southwest and northwest are the least developed.  The ferrous metallurgy industry is predominant in the north and northeast, whereas the non-ferrous metallurgy industry is predominant in the northwest and central-south.  In the northwest, non-ferrous metals account for 60 percent of the industry’s total output value.

China’s metallurgy production is distributed in four main ways. In regions around Liaoning province and Shanghai, both ferrous and non-ferrous metallurgy industries are well developed. In provinces such as Gansu, Hunan, Yunnan, Guangdong, and Henan, the metallurgy industry accounts for a small proportion of the country’s total metallurgy production.  However, non-ferrous production dominates the local industry and occupies an important place in national production.  Another distribution pattern is dominated by ferrous production, which accounts for 70 and 83 percent of this output and between 4.2 and 8 percent of the national total ferrous production. Other regions, such as Inner Mongolia, Qinghai, Xinjiang, Shandong, etc. had a low level of metallurgy development. The distribution of the metallurgy industry is determined in part by the availability of resources.

Metallurgy industries in China need to be developed, taking into account local conditions.  The exchange of metals between regions would enable them to meet the requirements of local development.

The Iron and Steel Industry

China is rich in iron reserves. Its iron and steel industry has long had priority in national industrial construction and remains today the principal part of its metallurgy industry.  There are 44 billion tons of confirmed iron ore reserves, of which industrial value deposits account for about half, ranking third in the world after Russia and Brazil. The iron ore grade averages less than 34 percent. Calculated at an ore-dressing rate of 85 percent, 3.5 tons of ore are required to produce one ton of iron. China is also rich in coking coal resources, comprising one third of the total coal reserve. This concentrated but unevenly distribution has largely determined the distribution of the iron and steel industry.  Gas coal accounts for 60 percent of the country coking coal; main coking coal accounts for 16 percent; rich coal accounts for 13 percent; and lean coal accounts for 11 percent. In the southwest, all four types of coking coal are produced; in the northeast and east, gas coal accounts for 70-80 percent of deposits.  A problem that arose is the high dust content of coking coal, which, after washing, produces inferior coke. Some provinces, regions, and municipalities are rich in both coking coal and iron ore.  Some areas, such as Liaoning, Beijing, Huber, Sichuan, Guangdong, and Tibet, are rich in iron ore but deficient in coking coal; others, such as Shanks, Gizmo, Qinghai, Kingie, and Xinjiang, are rich in coking coal but deficient in iron ore. Ancillary raw materials necessary to the iron and steel industry are abundant, but their combinations differ in various localities.  

Distribution

The iron and steel industries along the eastern coast have been used successfully to extend the industry into the interior regions. During the 1^st FYP period, more than half of the total investment in the iron and steel industry went into the Anshan iron and steel works, which served as a base for expansion of the industry into other parts of the country. The Anshan iron and steel works eventually grew to China’s largest, possessing several dozen major plants and mines, with 200,000 workers. In 1980, it produced 6.7 million tons of pig iron, 6.9 million tons of steel and 4.2 million tons of rolled steel.  Its four major mines produce 25 million tons of ore annually. The plant produces some 1,300 types of steel products and 20,000 specifications of rolled steel. During the 2^nd FYP period, the Wuhan and Baotou iron and steel works were built as key projects, providing a base in the southwest. The new Baotou, Wuhan, and Panzhihua iron and steel and the expanded Taiyuan iron and steel works are the main national iron and steel bases. These companies are the main bases built since 1949.  Wuhan, the largest, produced 2.7 million tons of steel in 1980, 3.4 million tons of pig iron, and 1.8 million tons of rolled steel. Edong mining area produces 5 million tons of pig iron annually.  In 1980, the Panzhihua and Baotou companies produced 1.6 and 1.2 million tons respectively of steel, 1.9 and 1.2 million tons of pig iron, and 1.1 and 0.3 million tons of rolled steel. The Panzhihua Company possesses China’s largest vanadium-titanium-magnetite mine. The Bayan Obo mine provided for the Baotou Company, being the country’s largest deposits of iron, rare earth, and niobium. In the east, Shangha’s iron and steel enterprises formed the base for reconstructing, expanding, and building new enterprises to enlarge its base. The ratio of investment in the iron and steel industry between the coastal and interior regions is 6:4. The coastal industrial bases have developed into major iron and steel bases.  Development in the interior regions has proceeded at an even faster rate. Interior regions account for an increasing percentage of the national total. In 1949, these regions only produced 13.9 percent of the national total output of steel. In 1965, the proportion was 22.6 percent.  In 1980, it was 37 percent. The industry has spread over the whole country, with the exception of Tibet.  

Despite the rapid development of the interior iron and steel industry, per-unit capacity investment in the interior is much higher than for the coastal areas; the per-ton comprehensive investment is three times that of the coastal areas. Further, the coefficient of return on investment and the ratio of profit-tax to funding are higher in the coastal areas than in the interior. Most of the iron and steel works in the interior regions are new and the investment in their ancillary projects, public utilities, and welfare facilities is therefore two or three times more than for the reconstruction or expansion of old enterprises. The industries in the interior regions were less efficient and profitable than those on the coast, mainly due to logistical and structuring factors. A balance between innovation, expansion, new plants, and coastal and inland locations needs to be maintained. The overemphasis in the past on the inland areas in the allocation of investment produced poor economic results. In the long-term, China’s iron and steel industry needs to remedy the present situation where production is concentrated mainly in a few coastal areas. The conditions must be created to enable new iron and steel bases to be opened in the inland areas where the deposits of ore (especially high-grade iron ore and coking coal) are concentrated.

Structure

The iron and steel industry is unbalanced in structure. In the mid-south and the east, the mining of iron is low compared with the output of pig iron. Production of pig iron exceeds that of steel, but more than is needed is produced in the northeast, north, and mid-south. In the east, especially in Shanghai, insufficient pig iron is produced and almost all of Shanghai’s requirements are imported. In the north, where there is a surplus of pig iron, Hebei and Beijing have more than they require, while Tianjin and Tangshan have none at all. In the east, Shanghai’s severe shortages of pig iron are in contrast to the surplus in Anhui and Shandong. This unbalanced distribution results in high transportation costs, placing a heavy burden on energy and transport facilities. Steel plants need to be located in areas where there is a developed engineering industry and reliable power sources. The output and specifications of steel need to be adapted to local demands. It needs to be balanced in order to avoid the transportation of semi-finished products and steel-rolling materials. The distribution of ores also needs to be taken into account. Apart from the northwest, the distribution of iron ore guarantees iron and steel industrial development. Shanghai produces more than 5 million tons of steel annually, using iron ore and pig iron mainly from Meishan and Manshan. If, when completed, the Baoshan iron and steel works needs to use local ore, the problem of ore supply to Shanghai will become more sever. The need for new mining bases is therefore paramount. Bayan Obo iron ore contains many associated minerals, including rare earth, niobium, manganese, fluorine, and phosphorus, and the rare earth content is very rich. There is potential for comprehensive exploitation to extract these associated minerals. The Taigulan iron ore mining area in Shanxi provinces has large reserves, but is as yet largely unexploited.  Its local hydrological and geological conditions made it difficult to exploit on a large scale at present. The Jiuquan iron mine, situated in high terrain, is difficult to exploit and its ore is of a low extraction value. Anshan, Benxi, western Panzhihua, and eastern Hebei are the key mining areas for expansion. The Anshan and Benxi mines provide ore mainly for the Anshan and Benxi iron and steel works, but they have the ability to supply ore to bases along the Chang Jiang. Panzhihua mine provides not only Panzhihua and Shuicheng iron and steel works, but also supplies Kunming and Chongqing. The eastern Hebei mine supplies ore to the iron and steel works in Beijing, Tianjin, and Tangshan, and has the potential to meet the demands of a large iron and steel base.

Scale

The concentrated distribution of large and medium-sized works is more economical than the construction of many small, dispersed, and technologically backward works. Initially, after 1949, much of the nation’s total investment was focused on large and medium scaled plants. However, policies in 1958 resulted in the establishment of many small iron and steel works, which not only dispersed investment but also slowed the construction of the large enterprises.  Small works were inefficient, because of backward techniques and equipment. The annual increase of steel output dropped to 4.5 percent during the 2^nd FYP period. Small works continued to be built throughout the 1960s and 1970s, although after 1978, due to poor results, many of these works were closed. China’s present national conditions, energy resources, management levels, equipment manufacturing capacity, and technical forces make economical the construction of large scale enterprises with 1-3 million ton capacity. In certain cases, conditions make feasible the construction of 5-6 million ton enterprises.  Medium-sized enterprises (from 300,000 to 500,000 ton capacity) are the backbone of China’s iron and steel industry. The concentrated distribution of large and medium-sized works is more economical than the construction of many small, dispersed, and technologically backward works. There are still many small, technologically backward blast furnaces in China, with a capacity of less than 100 cubic meters, whose efficiency has been steadily raised. If distributed properly, with reliable support and equipment, such enterprises are a necessary and economical alternative.

Location Factors

A number of factors determine the location of iron and steel enterprises, including energy, water, transport facilities, economic foundations, and conditions for cooperation, topography, geology, hydrology, and meteorology. Different types of enterprises have different location requirements. Enterprises producing alloy steel and other special kinds of steel need to be near energy supplies, consumer markets, and abundant supplies of scrap iron and steel.  Independent steel rolling plants must be near commercial steel sources and markets.  Independent and complex enterprises that smelt iron depend on ore and need to be close to reserves.  Iron and steel complexes should be located close to deposits of both. This type of enterprise is resource-based. Steel and rolled steel industries in Shanghai, Tianjin, and Tangshan have immense capacity, importing several million tons of pig iron, iron ore, and coking coal. This type is distribution-based. A third type of enterprise is based on coastal shipping facilities. The new Baoshan works are of this type. High-grade coal is imported, as well as coking coal. Large amounts of its products are exported. Other types of enterprises are market-based, with emphasis on proximity to local engineering industries.  

The Non-ferrous Metallurgy Industry

Non-ferrous metals are classified as heavy, light, noble, rare, and semi-metallic, not based on iron ore. China has many non-ferrous metal areas or belts, including the Guixhou-Sihuan-Hunan-Guangxi mercury belt, the Hunan-Guizhou antimony belt, the Nanling tungsten and tin belt, the Hunan-Guizhou antimony belt, and so on. The country’s deposits of various non-ferrous metals are amongst the largest in the world. Although heavy metals are found in most provinces, they are concentrated in a few parts of the country. Rare metals are found in large and concentrated deposits, but are unevenly distributed in the world. China is especially rich in deposits of rare earth, niobium, vanadium and titanium, which are scarce in the world.  The areas that are rich in non-ferrous metal deposits are close to water resources and large coalmines, which provide cheap energy for smelting. Some of these deposits are of low grade or in remote areas. Therefore, despite the superior variety and distribution, backward ore dressing, smelting, and processing techniques prevent comprehensive development of its resources. The production of copper, aluminum, lead, and zinc accounts for 90 percent of the output of non-ferrous metals. High-grade ore containing tungsten and molybdenum are comparatively high. China’s output of the 10 most commonly used non-ferrous metals is sixth in the world. The world average output of copper, aluminum, lead and zinc in proportion to steel is 1:19.41, compared to 1:33.48 in China. The greater consumption of non-ferrous metals is an indicator of economic development. Despite the vast resources, China’s non-ferrous metals industry is unable to meet the demands of its economy, requiring the import of some non-ferrous metals. This is the result of low ore grade, low quality products, weak industry foundation, and the poor competitive power of China’s non-ferrous metals in the international market. The largest non-ferrous metals producers are Shanghai, Liaoning, Gansu, Hunan, and Yunnan. The output value is highest in Shanghai, which has a high technical level and smelting capacity, but limited resources and energy supply. The industry includes all major production processes, including mining, dressing, smelting, refining, and rolling. The distribution of the non-ferrous metals industries therefore varies according to their special requirements.  

Heavy Non-ferrous Metals

Because China’s heavy non-ferrous metal ores are of a low grade, a large volume of ore is required to be transported between mines and dressing plants. Ores with a low metal content can be crude-smelted near the dressing plant before being refined elsewhere using electrolysis. This consumes large amounts of electricity, requiring this to be done near power centers. Also, a comparatively high technical level is required in rolling of pure metals and precious alloys. Finishing can be generally separated from smelting and is best done in the major consuming area, near machinery industries. Coordination of the non-ferrous metals and machinery industries will enable production standards to be set according to the specifications required by the machinery industry.  

China’s copper reserves are distributed mainly in the lower reaches of the Chang Jiang, in Yunnan, Gansu, and Shanxi provinces, and in the Changdu area. Lead and zinc are mined mostly in the Lingnan range and in the southwest and Gansu province. Because the ores are of low grade, mining and dressing are closely related. Refining is carried out for the most part near medium or large cities. Gejiu country in Yunnan is the largest and oldest tin producer in China. Its output is 70 percent of the country’s total output. Long exploitation has reduced both the grade of its ore and its output. Recent surveys have found 17 deposits in western Yunnan province, some of which is high grade. Conditions exist therefore for further expansion of the tin industry. The antimony industry centers mainly on Hunan, it’s output accounts for 80 percent of the country’s total. The rest is mined in Guangxi, Gansu, Yunnan, and Guizhou. The Jinchuan nickel mine in Jinchang is the largest deposit in the world. It’s ranked second for sulphuric nickel. The reserve is large, the grade high, and its rich in associated minerals. The large-scale exploitation of nickel in Jinchuan has made China complete independent. New technological extraction processes for rare and precious metals have also raised the recovery rate of platinum from 49 to 75 percent, that of palladium from 3 to 50 percent, and cobalt from 32 to 60 percent, thereby making import unnecessary.  Mercury is produced in Guizhou, China’s largest producer; Hunan is the second largest. The largest mines in Guizhou are the Wanshan special area and the Xinhuang mine.

Light Non-ferrous Metals

The main minerals of the light non-ferrous metals industry are aluminum and manganese.  The industry is distributed close to electricity resources, requiring high technology and exploitation on a large scale. It is of considerable importance to national defense. The production of aluminum by electrolysis consumes large amounts of electricity, some 18,000 kWh per ton. A stable and reliable supply is a priority and plants need to be located near power stations. Aluminum plants at Lanzhou, Liancheng, and Qingtonxia rely on Huang He hydropower sources. A large plant set up in Fushun in Liaoning province during the 1^st FYP period as an important part of the development of a heavy industrial base in north-east China is still China’s largest electrolysis aluminum base. The Baotou aluminum plant is also one of China’s  largest. The main aluminum manufacturing industry centers are in Harbin, western Gansu, and Chongqing. Bauxite mines are widespread, with the largest deposits in Shanxi, Henan, Guizhou, and Guanxi. The best conditions for exploitation are at Xin’n in western Henan, Xiaoyi and Yangquan in Shanxi, Xiuwen and Qingzhen in Guizhou, and Pingguo in Guangxi.  The country’s largest deposits of magnetite are in the northeast and east, with the largest in Liaoning. Refining and production are concentrated in Fushun. An aluminum processing plant in western Gansu also produces magnesium materials.  

Rare Metals

Deposits of rare metals (including tungsten, molybdenum, titanium, and vanadium) constitute half of the country’s total non-ferrous metals reserves.  China’s reserves, output, and export volume of tungsten are first in the world. The main producer is the Nan Ling mining area, comprising southern Jiangxi, southeast Hunan, northern Guangdong, eastern Guangxi, and western Fujian provinces. Tungsten productive potential is equal to the total requirements of the international market. In fact, about half of the world consumption of tungsten comes from China. However, poor techniques amounted to low quantity and quality. The improvement of processing is of an utmost importance in developing the country’s superior tungsten industry.  Molybdenum is produced mainly in Yangjiazhangzi and Jinchengdui, both of which have considerable potential for development. Titanium and vanadium output is at present small, but has expansion potential. 80-90 percent of the total reserves of titanium and vanadium are found in Panzhihua, which also has the largest iron, nickel, cobalt, and chromium deposit.  The site has an annual production of several thousand tons of vanadium dregs. Its 45-48 percent grade titanium concentrate can be used to produce titanium dregs, white titanium, sponge titanium, high-quality vanadium dregs, and high-grade vanadium pent oxide.  

Rare Earth

Reserves of rare earth are the richest in the world, with a complete variety of quality, which constitutes 50 percent of the world total, located mainly in Inner Mongolia, Jiangxi, Hunan, Hubei, Guangdong, Guangxi, Sichuan, Shandong, and Gansu. More than 95 percent of reserves are in Bayan Obo in Inner Mongolia (the largest rare earth deposit in the world).  The content of elements such as samarium and europium is also comparatively high. Its output in terms of oxide content ranks second in the world only to the United States. Baotou in Inner Mongolia is the main production base. It has comprehensive ore-dressing technology that is able to produce high grades of rare earth metals. The recovery rate is close to 40 percent. Higher quality products are a prime concern if China is to compete in the international market.