What Should China Do with 8 Billion Metric Tons of Excess Steel?

(Image courtesy of Duke University.)

As a steel manufacturer, what should you do if you find yourself a few billion metric tons over capacity?

For China, apparently the answer is to keep making more steel.

A new report from Duke University entitled “Overcapacity in Steel: China’s Role in a Global Problem” highlights how the expansion of China’s steel sector has fueled the current international steel crisis.

“By producing too much steel, then shipping and selling its overcapacity overseas below market prices, [China] bankrupts companies following free market rules and costs tens of thousands of workers their jobs,” said United Steelworkers (USW) International President Leo W. Gerard in response to the report.

According to the report, China has produced 2.3 billion metric tons of steel since 2000, despite the fact that it only needed to produce 1.5 billion metric tons to meet global demand. The report also states that although China publicly admitted to an overcapacity problem in 2007, it nevertheless added 552 million metric tons of new capacity since that time.

That’s seven times the total U.S. steel production in 2015, according to the report.

“In the United States alone, China’s overproduction has resulted in the loss of as many as 19,000 steel sector-related jobs,” said Gerard.

The ultimate cause of the problem, according to the report, is China’s use of state-based subsidies in the steel industry.

“China’s ‘state capitalism’ model, still heavily influenced and controlled by Beijing, is at the core of the current overcapacity problem in the steel sector,” states the report. “To address overcapacity, China must reform to reduce the systemic nature of state-led development in the country and become more aligned with market economy principles as generally practiced.”

In other words, duties against imports of Chinese steel do not address the underlying problem. The resolution to the steel crisis must come from China itself.

In the meantime, here are a few suggestions for what China could do with eight billion metric tons of excess steel.

60 Million Statues of Guan Yu

(Image courtesy of China Daily.)

The recently unveiled statute of the ancient Chinese General Guan Yu is 190 ft tall and weighs over 1,320 tons. It’s made of bronze, which is heavier than steel, but some rough calculations suggest that China could turn its excess steel into roughly 60 million of these massive statues, or one for every 23 Chinese citizens.

151 Million Type 99 Tanks

(Image courtesy of Max Smith.)

The Type 99 is China’s third-generation main battle tank. Each tank weighs approximately 53 metric tons, which works out to roughly 151 million tanks, obviously not counting all the non-steel components involved. For reference, the People’s Liberation Army has approximately 2.3 million personnel.

Rebar for 3,527 Trump Walls

(Image courtesy of The Young Turks.)

Last year, an engineer wrote an article for The National Memo explaining why Donald Trump’s proposal to build a wall along the U.S.-Mexico border is so implausible. The engineer estimated that about five billion pounds of reinforcing steel would be needed for the wall. “We could melt down four of our Nimitz-class aircraft carriers and would probably be a few cruisers short of having enough steel,” he wrote.

Sure, or maybe Trump could make a deal with China.

What do you think China should do with eight billion metric tons of excess steel? Comment below.