China workers face turmoil

Hundreds of laid-off steelworkers gathered outside their former employer's office this week to protest at losing their jobs, victims of a global glut.

But the smokestacks nearby were not British; they are in China -- the very place blamed by European politicians for the plunging prices and excess capacity threatening the industry worldwide.

As recriminations fly over the closure of the Port Talbot steelworks, the pain of redundancy is felt as keenly in the northern Chinese steel hub of Tangshan as it is in Wales.

"I have a daughter," said one man, asking to remain anonymous for fear of reprisals. "I’m the main breadwinner in the family. What can I do in the future?"

He was among 4,000 people who workers say face unemployment after state-owned steel firm Guofeng halted work at one of its hulking production zones last week, citing "uncontrollable factors".
They are just the tip of the iceberg; major Chinese steel producers lost more than 100 billion yuan ($15.5 billion) last year, an industry association said Thursday, and Beijing has said it will shed 500,000 steel jobs in coming years.

The figure is more than the 328,000 people directly employed by steel companies in the entire EU.

- Building boom -

For European and American politicians, China is the bete noire of the global steel industry.

How can their higher-wage economies compete with low-paying plants that churn out vast quantities of the metal, they ask, accusing Beijing of dumping -- selling a product in foreign markets at below-cost price.

China's steel industry is huge.

National production grew sevenfold from 2000 to 2014 as domestic demand boomed from massive infrastructure investment in swelling cities, and as the government ploughed billions of dollars into heavy industry to counter the impact of the 2008 global financial crisis.
At the same time plants built by private investors expecting ever rising prices also went into operation.

By 2014, China was producing some 820 million tonnes a year -- about half the world total and seven times more than the second biggest producer, Japan.

But domestic demand peaked the same year as China's building boom began to wane and growth slowed, analysts say, causing commodity prices to plummet.

World export prices for steel have fallen more than 70 percent from an all time high of $1,113 per tonne in July 2008 to just $321 last month, according to the website steelbenchmarker.com.

China can now produce about 1.2 billion tonnes of steel each year, but local demand is around 700 million tonnes, and companies have looked to foreign markets to make up the deficit, primarily in Asia.
"In 2015 China exported about 100 million tonnes of steel products," Cai Rang, chairman of the China Iron and Steel Research Institute Group told state media last month -- around twice as much as two years previously.

The exports were "a relief for domestic capacity but a shock to the international market", he acknowledged.

That shockwave played out when India's Tata Steel announced last month it was selling the loss-making Port Talbot steelworks, with the possible loss of 4,000 employee positions and many more indirectly, triggering doom-laden warnings of worse to come for Europe's steel industry.

However, World Steel Association figures show that a tiny proportion -- about six million tonnes in 2014 -- of Chinese exports go to the EU, where some 100 million tonnes is traded between the bloc's countries.

But "because China's production is so large, even its small proportion of exports can influence countries abroad", said Kevin Bai, a market analyst at CRU Group.

- 'Love our country' -

Many Chinese heavy industry giants, including in steel, are lumbering state-owned firms, riddled with inefficiencies but protected by authorities fearful of unrest.
Beijing this year vowed to eliminate 100 million to 150 million tonnes of capacity by 2020. It said the reforms would cost half a million jobs, but did not give a timeframe.

Ratings agency Fitch said this week that the plan "faces immense social and financial challenges".

Protests have already hit China's coal sector, which faces similar issues of overcapacity, inefficiency and an excess of supply over demand, and where the government says it will cut some 1.3 million jobs.

Industrial unrest is anathema to China's ruling Communist Party, and last month it clamped down on a protest which brought the city of Shuangyashan to a standstill, where miners said dozens had been detained.

Steelworkers in Tangshan fear a similar crackdown.

"Some people have been arrested," a 41-year-old Guofeng worker surnamed Shao told AFP. "The police have warned me, and said I'll be detained if I make a fuss."

Previous bouts of unemployment in China have been cushioned by a large agricultural sector to which migrant workers can return, but breakneck urbanisation has swallowed swathes of farmland over the last decade, and Shao said local workers "have no chance of going back to farming".

Guofeng refused to comment when contacted by AFP.

"In the factory we are told to love our country," said Shao. "But to see my child eating one meal a day while still growing, because food prices are so high -- that's not acceptable".
Source :AFP