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Analysis on Ferroalloy Industry Developing Tendency in China during “Twelfth Five-Year”

Date:2014-09-11

China is well-known as major steel producer as well as ferroalloy producer in the world. Currently, Chinese ferroalloy output takes about 40% of total amount throughout the world. As the necessary accessory for steel industry, ferroalloy demand takes about 4% of steel output. We cannot optimize steel industry in China without supports from ferroalloy industry. How to develop Chinese ferroalloy industry has been the principal contradiction that confused domestic ferroalloy enterprises.

Status and Development Direction of Ferroalloy Industry in China

The gap between Chinese ferroalloy industry and advanced level in the world remains large. In China, ferroalloy enterprises amount has increased rapidly from 800 in 2000 to 1,800 this year and capacity increases from 9 million ton to over 36 million ton. However, steelmakers’ demand for ferroalloy is only 24-25 million ton. In other words, 1/3 output is excess and as annual newly-increased capacity is more than 2 million ton, overcapacity contradiction will accelerate in the future. As anticipated, Chinese steel output during “Twelfth Five-Year” period will be no more than 800 million ton and its demand for ferroalloy will be no more than 30 million ton. And ferroalloy ex-import deficit will enlarge both currently and in the future. Meanwhile, there are various problems for Chinese ferroalloy enterprises, like scattered layout, small scale, low electric furnace capacity (electric furnace with less than 6,300KVA takes 1/3 of total amount), rudimentary facilities, serious pollution and below energy-conservation and environmental-protection standard. Until present, less than half of Chinese ferroalloy enterprises have achieved the “Ferroalloy Industry Access Condition”. A series of problems about industrial layout, product structure, production technology, processing equipment and staffs’ quality, seriously restrict ferroalloy industry improvement in China.

Chinese steel industry puts forward goal of “Four Transformations” during “Twelfth Five-Year” period. The four transformations are as follows: firstly, transformation from pursuit of output expansion (by means of increasing resources input) to the intensification form of improvement of quality and benefit (by means of emphasizing on technology, science management and talents). Secondly, transformation from dominant steel industry development to diversified development in both dominant and downstream industries. Thirdly is the transformation from inland development to development in coastal areas and raw-material bases. Fourthly is the transformation from introducing technological innovation to original innovation that can lead the development of the enterprises. As ferroalloy industry developing should correspond with that of steel industry, “Four Transformations” above are also applicable to ferroalloy industry.

Optimizing Industry Layout and Transferring to Areas with Resource Advantage

Majority of ferroalloy enterprises distribute in areas with coal, water, power, transportation, steel and raw material advantages. As ferroalloy industry belongs to high energy-consumption and resources-relying industry, power and mine are basic factors for ferroalloy production. And as it is known that power is closely related to water and coal, areas with resource advantage attract many ferroalloy enterprises. Meanwhile, mineral resource is also another vital factor. Domestic chrome ore is severely lacking and potential chrome resource distributing in 13 areas reaches about 31,000,000 ton. Thereinto, majority of chrome ore distributes in Tibet and the volume is only about 4.25 million ton. Currently, the amount of metal manganese ore resource in China is about 140 million ton, which ranks No. 5 in the world. And manganese ore mainly distributes in Hunan, Guangxi, Yunnan, Guizhou, Chongqing and Liaoning, etc. With large-scale of exploitation, grade of manganese ore will lower as well as utilization value. In several decades, it is assessed to rely on importing. And low-grade laterite-nickel ore totally relies on imports. In China, only silicon and limestone resources are rich. Therefore, manganese, chrome and nickel enterprises are advisable to distribute in coastal areas in order to lower raw material freight. Meanwhile, steelmakers and ferroalloy enterprises, as the downstream enterprises of manganese, chrome, nickel and silicon ore, should take transportation fees and grade into consideration.

Accelerating Technological Improvement, Achieving Advanced Level in the World

It is necessary to continuously optimize production process and lifting equipment level. Although ferroalloy industry develops rapidly in recent ten years, enterprises’ production process and equipment level still remain outdated. Dominant technology in China is equivalent to level of developed countries in 1970s or 1980s. Currently, better technological level in China is even equivalent to medium level in foreign countries. According to “Ferroalloy Industry Access Condition”, the closed/ semi-closed electric furnace capacity of enterprises with better staff quality, technology and scale, will be increased from 25,000KVA to 45,000KVA-50,000KVA during “Twelfth Five-Year” period. Such provision is suitable for China’s national situation. It’s a long time to solve raw material pre-treatment, management, technological and consumption problems. Therefore, it is advisable to lift production process and technical equipment level gradually.

It is doomed to reduce energy and resource consumption and wastes utilization. In order to utilize resources and energy efficiently and ensure the safe operation of large-scale of electric furnace, we need to recycle furnace flue gas and molten iron and realize safe operations. Until 2015, the smelting power consumption of every ferroalloy unit and consumption of chrome and manganese ore is assessed to decrease about 10% compared with that in 2010.

It’s advisable to further improve and introduce modern and environmental protection technology, transform newly electric furnaces and to realize pollutant discharge standard. Meanwhile, it is necessary to ensure completion of environmental protection equipment and 100% operation rate.
To accelerate outdated production facilities, introduce modern foreign equipment, accelerate R & D ability and lift development level as a whole. The technologies, like electric furnace automation, agglomeration, sintering pre-reduction, raw material briquetting, ingoting before furnace, dust removal by coal gas dry process, cogeneration, closed electric furnace, low-voltage compensation for silicon-manganese series electric furnace, have basically achieved mature. According to China’s national situation, in order to lift overall level, we should partly introduce, consume and improve technology. According to national requirements, electric furnace with less than 12,500KVA will be eliminated during “Twelfth Five-Year” and newly-built capacity should no less than 25,000KVA. Therefore, based on international criteria, it is advisable to eliminate or build new electric furnace equally weight or less weight in different enterprise and area. In other words, eliminate or increase industry level actually.

Improving Industry Concentration and Labor Productivity

Due to changed factors like national macro-control policy, “Twelfth Five-Year” period will be the critical period for domestic ferroalloy industry integration. At present, due to continuous financial crisis in the world, partial ferroalloy enterprises shut down or have to reorganize. Enterprises with small scale, rudimentary facilities, technological backward and short capital, are facing risks of obsolescence. On contrary, major enterprises will become stronger. According to ferroalloy industry developing policy and structure adjustment advice during “Twelfth Five-Year” period, enterprises whose capacity is less than 100,000 ton will basically shut down until 2015. The number of enterprises whose capacity is more than 100,000 ton will reach 120-150. Thereinto, 8 enterprises’ capacity is more than 1,000,000 ton, about 10 enterprises’ capacity is more than 500,000-1,000,000 ton and about 30 enterprises’ capacity is 200,000-500,000 ton. The labor capacity of silicon ferroalloy enterprises is assessed to be 150 ton per person and that of manganese and chrome ferroalloy enterprises is assessed to be 200 ton per person till 2015.

Optimizing Industry Species Structure and Upgrading Class

At present, Chinese ferroalloy industrial structure remains out of rationality and due to excess capacity of certain species, the competition of the same species amid different enterprises is severe. Therefore, it is emergent to accelerate species structure adjustment.
It is advisable for enterprises and areas to adjust species structure and upgrade products quality based on their own conditions. They should pay attention to local resources (including water, power, mine, equipment, staff and technology, etc). Meanwhile, they should integrate balance based on their own advantages and it is vital for them to take advantage of the largest. The advantage of foreign brand is the comprehensive utilization level of equipment, mine and resources, while their disadvantage is that the quality of most products is dissatisfying and impurity element control remains substandard. Therefore, in order to increase product competition, enterprises should emphasize on species refinement and impurity element control, which is also the main developing direction of ferroalloy industry in China.

From chrome and nickel alloy, China is the country lacking of chrome and nickel alloy resources and we mainly rely on imports. Compared with other countries, we are losing advantage gradually and it is inappropriate to increase productivity due to excess capacity at present. It is advisable to emphasize on improvement, transformation and concentration and eliminate obstacle capacity. And appropriately increase single capacity, scale, and product species in order to upgrade product class. In other words, we should upgrade from low-class extensive production to high-class refined production. From silicon alloy, 80%-90% silicon alloy capacity throughout the world is in China and specification ranks on advance class in the world. In the future, it is advisable for us to emphasize on product upgrading, adjustment from aspects of scale, volume and district. From manganese alloy, due to manganese resources consumption, we will become increasingly rely on imported manganese in the future. And it is inadvisable to increase capacity, while we should emphasize on product structure adjustment and upgrade product class. At present, low-content of nickel iron production develops rapidly with increasing capacity. In the future, due to transportation problem and increasing capacity, nickel iron capacity will become excess. Therefore, we should restrict its development as soon as possible. Based on above analysis, the principle for ferroalloy industry in China is developing silicon alloy, controlling manganese alloy, restricting chrome and nickel alloy in the future.

All in all, it is advisable to analyze internal force and external force in domestic ferroalloy industry with dialectical point of view. We should understand our advantages as well as disadvantages. Therefore, it is helpful for the development of ferroalloy industry as well as steel industry. It is necessary to optimize layout, adjust industry & product structure, lifting equipment level and integrate scale. In other words, survival of the fittest, the unfit is eliminated.

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