by Vaclav Smil
Inevitably, these changes also altered America’s status as a steel trader. The country remained a net steel exporter until 1958. Then came a slow rise of cheaper imports to about 10% of total consumption by 1973 and to almost 24% by the century’s end, while recent net steel imports (excluding semi-finished products) have remained mostly between 15% and 18% of apparent consumption (Kelly & Matos, 2014). And, of course, the great retreat also meant the loss of the long-held global primacy. Post–WW II expansion of the Soviet steel industry kept on narrowing the US lead: in 1950 the USSR produced 31% of the US output; by 1960 it was 72%. After topping the United States for the first time in 1971, the country remained the world’s top steel producer between 1975 and 1991 (peak output of 163 Mt in 1988), and only when the union unravelled (just before the end of 1991) and the industrial production of its successor countries collapsed did Japan rise to the top position, which it held for just 4 years before China became the world’s largest producer in 1996 and has remained ever since.
Japan in the Lead
Japan’s first integrated modern iron and steel plant began its production only 48 years after the country’s opening to the world, in 1901 with the blowing-in of Higashida No. 1 blast furnace at Yawata Steel Works in northern Kyūshū (Yonekura, 1994). Steel output rose during WW I, and after the stagnation of the 1920s Japan’s steel demand during the 1930s was driven primarily by the conduct of war in China and by the preparation for attack elsewhere in Asia and on the United States. Japan became self-sufficient in steel production during the 1930s, by 1937 it produced 6.4 Mt, and by 1938 nearly 40% of iron and steel consumption was claimed by the military (Yasuba, 1996). Even so, there could be no better material indicator of Japanese madness in attacking the United States than the fact that the country’s steel production in 1940 was less than a tenth of the American rate (6.9 vs. 78 Mt): in material terms Japan lost the war even before it began.
Despite the ban on US scrap imports (which amounted to 2.17 Mt in 1939), wartime Japan was able to keep steel production close to the pre-war level until 1943 (Emi, 2015). Its largest steel plant, Imperial Iron and Steel Works in Yawata, was the first target chosen for a mass attack on Japan’s main islands, but the June 1944 raid caused almost no damage (Polmar & Allen, 2012). But this plant and other steelworks were eventually damaged before the war ended in September 1945, and by the end of 1946 the country had only three working blast furnaces, compared to more than 20 before the war. Naito, Takeda, and Matsui (2015) published a detailed account of the postwar recovery (it was surprisingly fast, with 16 blast furnaces operating by 1950) and of the following phases of Japan’s rise to the world leadership in ferrous metallurgy.
Postwar development of Japanese steel industry was guided by three rationalization plans formulated by the Ministry of International Trade and Industry and extending between 1951 and 1965: they included tax breaks, depreciation allowances, tariff exemption for the industry’s imports, support for exports, speedy licensing of foreign patents, and access to cheap credits (Elbaum, 2007). The two rationalization waves of the 1950s reduced coke inputs and boosted productivity. The first major postwar project, Chiba Works of Kawasaki Steel (now JFE Steel) on the northeastern shore of Tōkyō Bay, began its operation in 1953, and it was followed by construction of new large (2000 t/day) furnaces in half a dozen mills.
Japan was an early adopter of two key steelmaking innovations: in 1955 Sumitomo Metal licensed the continuous casting method, and the first basic oxygen furnaces began operating in 1957 (50-t BOF at Yawata Steel), and oxygen steelmaking surpassed open hearths by 1965 (Emi, 2015). British steel output was surpassed in 1960 and West Germany’s production 3 years later, and in 1970 Yawata Iron & Steel and Fuji Iron & Steel merged to form Nippon Steel Corporation. Demand for steel was driven first by postwar reconstruction and then by Japan’s rapid urbanization and construction of enviable public and intercity transportation and, to an increasing degree, by exports of steel-intensive products. First, starting in the late 1950s, Japan became a global leader in production of cargo ships and giant oil tankers in particular, and then came the Japanese car exports, with Honda and Toyota pioneering the conquest of the US market (Smil, 2006 and 2013). Makers of industrial plant equipment (Mitsubishi, Mitsui, Ishikawajima) and heavy machinery (Komatsu, Sumitomo) were other key exporters with large demands for quality steel.
During the 1960s Japan’s pig iron production rose nearly sixfold (to nearly 70 Mt), and by 1973 the country had 60 operating blast furnaces (all of them using heavy oil injection) and only the USSR (also relying on large, highly automated but less efficient furnaces) produced more pig iron. In 1973 Japan’s crude steel production reached 119 Mt, equal to 16% of the global output—but to measure the importance of Japanese steelmaking merely by the country’s aggregate output or by the number of years it was the world’s largest producer would profoundly underestimate its contribution to the post–WW II advancement of the industry.
By the late 1950s the US ironmakers still dominated the industry in terms of output but Japan had emerged (just a few years after the country finally surpassed its prewar economic performance) as the most innovative producer of pig iron. As in so many other instances of the country’s technical progress, the Japanese ironmakers first mastered the American experience and then they proceeded to build blast furnaces distinguished not only by their unprecedented size but also by their innovative features (ranging from automated material handling to computerized furnace controls and optimization of processes through operations research) and overall efficiency and productivity.
Between 1960 and 1990 every one of the successive 16 furnaces to hold the world record for internal volume was built in Japan. The world’s largest blast furnace, No. 2 furnace at Nippon Steel Oita Works, with a hearth diameter of 15.6 m and volume of 5,070 m3, was blown-in in 1976 (Fig. 4.2). Rising furnace size and advances in operation lowered the reducing agent rate (coal and oil) to 494 kg/t of hot metal, the world’s lower level, and Japanese ironmakers pioneered, among other innovations, high-pressure process equipment, large hot stoves, bell-less charging arrangements, and computerized furnace controls. Expansion of improved ironmaking was accompanied by Japan’s eager adoption of the new steelmaking system that combined basic oxygen and electric arc furnaces with continuous casting and improved methods of rolling (Ogawa, 2012). This resulted in a rapid reversal of productivity rankings. While in 1960 Japan’s average labor requirement was almost 49 man-hours to produce a tonne of steel, nearly three times the US mean of 16.5 h, by 1973 the Japanese mean was below 9.5 h and the US steelmakers averaged just over 11 h (USBC, 1975).
Figure 4.2 Nippon Steel’s Oita blast furnaces No. 1 and No. 2 (on the left) at Oita Works in eastern Kyūshū. Reproduced by permission from NSSMC.
Japanese crude steel production was less than 6% of the US output in 1950, but two decades later it was equal to nearly 80% of the US level, and it surpassed it in 1980. Its production originated in large modern coastal steelworks designed to receive raw materials transported by large bulk carriers from overseas (Australian and Latin American ore, North American and Asian coal), convert them in blast furnaces whose inner working volumes were mostly in excess of 3000 m3, and process pig iron in basic oxygen furnaces. Japanese mills were among the earliest adopters of continuous casting and also became the world’s leaders in the longevity of furnace operations and in their energy efficiency (Naito, Takeda, & Matsui, 2015).
Japanese steelmakers also led the effort to pretreat hot metal in order to reduce the presence of silicon, sulfur, and phosphorus before decarburization in converters. They also pioneered the use of process computers to supplant human control in operating blast furnaces and steelmaking furnaces, and they introduced advances in refractory formulation and installation. And as steel demand began to stagnate, some of them looked for new business opportunities: NKK diversified into the treatment of waste materials and recycling, water treatment, municipal waste incineration, air pollution control, energy co
nservation, clean energy production, and soil remediation.
Japan’s twentieth-century steel production peaked in the same year as the US output (in 1973 at 119 Mt), and then—affected by oil price rises of the 1970s, the high value of yen after 1986, and the rise of Chinese steelmaking in the 1990s—it fluctuated mostly between 95 and 110 Mt until 2003, before reaching a new high of 120 Mt in 2007, but it retained its focus on performance, efficiency (low coke rate, pulverized coal injection), and the quality of both material inputs and finished steel products. The industry’s labor productivity rose from 450 t/worker in 1975 to 750t in 1990, to 1400 t in the year 2000, but it has been largely stagnating since that time. The number of blast furnaces fell from 40 in 1985 to 27 by 2013, but 13 of them were converted to have volumes of more than 5000 m3, and their productivity reached a new high at 1.94 t/m3. After Nippon Steel merged with Sumitomo Metal, the new company decided to close the No. 3 furnace at Kimitsu by the end of fiscal year 2015.
Chinese Dominance
The pace of China’s ascent to the dominant place in iron and steel production has been determined by the country’s enormous shifts in basic industrial policies. When the Communist Party of China took the full control of national government and established the People’s Republic in October 1949, the country was producing just 158,000 t of steel, but then its economic policies copied Stalinist stress on the development of heavy industries. In 1957, after the end of the country’s first five-year plan, China’s steel output reached 5.3 Mt, heavily concentrated in the Northeastern provinces where Japan developed the industry during its pre-1945 occupation of Manchuria (Tang, 2010).
But, in a typical Stalinist fashion, a small steel mill established in the western suburbs of Beijing in 1919 was greatly expanded and Shougang steelworks eventually became the country’s largest steel producer (with annual capacity of 10 Mt, employing 200,000 workers), and for more than half a century it kept on polluting the capital. The enterprise was closed down only before the 2008 Olympics, when the government embarked on a massive cleanup of the capital (Fig. 4.3). The company’s new site, with two very large (>5000 m3) blast furnaces, is on Caofeidian, an artificial island reclaimed from Bohai Bay, east of Tianjin in Hebei provinces.
Figure 4.3 Shougang iron and steel plant in the western suburbs of Beijing. The photo was taken in February 2012, 4 years after the plant was closed before the 2008 Olympics. Corbis.
As the Sino-Soviet rift deepened during the late 1950s the Stalinist model appeared too slow for Mao Zedong (1893–1976), who wanted to catch up, even surpass, the performance of leading Western economies in a matter of years. While Nikita Khrushchev was telling the Americans “We will bury you,” Mao devised a much bolder version of catching up and surpassing, a delusionary Great Leap Forward. In 1958 the Communist Party’s Central Committee
put forward an inspiring slogan which calls on the people of the entire nation to exert their utmost so that China can surpass Britain within 15 years or in less time in output of iron, steel and other major industrial products. In other words, within that period China is to be transformed from a backward agricultural country into an advanced, socialist industrialized one. The Chinese people, filled with firm confidence and enthusiasm, are striving for the fulfilment of the Party’s call.
(Huang, 1958, 1)
And the next step was to surpass the US industrial production as China pursued its astonishing dash toward global supremacy: Mao, a dutiful (albeit Stalin-hating) Stalinist, was obsessed with steel production, but his ignorance of realities led him to conflate pig iron and steel and to call for production methods that were doomed to fail. In May 1958 Mao claimed that “with 11 million tons of steel next year and 17 million tons a year after the world will be shaken” (Mao, 1969, 123), but as China had just a handful of Soviet-designed modern iron and steel mills built during the first five-year plan, his solution to make the Leap work was a mass mobilization of peasant labor (Wu & Ling, 1963).
Some 20 million peasants were forced to abandon their fields and open up 110,000 small mines to produce poor-quality coal used mostly in smelting of pig iron. Tens of millions of peasants were ordered to dig local deposits of low-quality iron ore and limestone, and in order to produce enough charcoal they were forced to cut down not only scarce forest trees but also orchards and groves, intensifying the country’s deforestation. These low-quality ingredients (and often also any scarce scrap metal, even pots and pans) were charged into simple clay “backyard” furnaces, traditional Chinese clay structures that were used for some two millennia for small-scale local pig iron production. Vastly exaggerated claims of the Great Leap years make all numbers suspect, but as many as 600,000 of these clay furnaces may have been built in 1958 and 1959 (Smil, 2004).
In 1959 Zhou Enlai (1898–1976) said that in the previous year those furnaces produced 4.16 Mt of usable pig iron, or 30% of that year’s total output, and it was estimated that there was an additional 4–5 Mt of unusable inferior-quality metal (Wagner, 2013). Naturally, this smelting could not produce any steel—just lumpy cast iron heavily contaminated with slag and with high carbon content, and hence very brittle and unfit for making even simple farming implements—but the Chinese reports, as well as the numerous writings by foreign observers and Sinologists, keep referring to the metal as steel from backyard furnaces, an instructive indication of the lack of basic understanding of material realities of the modern world (Li & Yang, 2005).
Other mass campaigns of the Leap years diverted labor from agriculture to wasteful industrial efforts, but due to their high labor requirements backyard iron furnaces were a key reason for the sharp decline of crop harvests and the world’s largest Mao-made famine, which claimed the lives of more than 30 million people (Smil, 2000). The Chinese Communist Party continues to blame poor weather as the famine’s principal cause, but the official Chinese statistics show that similar or more extensive droughts and floods had only a marginal effect on the country’s harvest once the agriculture was privatized during Deng Xiaoping’s modernization drive of the 1980s (Smil, 2000).
Once the Great Leap ended (in 1961) backyard furnaces were abandoned, and during the 1960s steel production from older Soviet-built mills and new mills based on Soviet know-how (Sino-Soviet rift turned into undisguised hostility by the mid-1960s) grew 2.5-fold, from less than 7 to nearly 18 Mt between 1962 and 1970 (NBS, 2000). In 1973, 15 years after the call for surpassing the United Kingdom, China’s modern steel mills produced 22.3 Mt compared to the British output 26.7 Mt in: what mattered is not that the output came within 17% of its 1958 goal but the enormous damage done by the Great Leap effort. Politically and socially China was in turmoil during the 1970s (end of the Cultural Revolution, Mao’s death in September 1976, succession struggles), but steel output had doubled to 37 Mt.
During the first decade of Deng Xiaoping’s (1904–1997) economic reforms, steel production grew by nearly 80% to reach 66 Mt in 1990 as China began to benefit from foreign expertise and designs: most importantly, the largest iron and steel mill of the early period of modernization, Shanghai Baosteel (now the world’s fourth largest steel producer), received a lot of technical support from Nippon Steel. During the 1990s China’s steel output, once again, almost doubled, to 128.5 Mt, but these three successive doublings or near doublings were just a prelude to China’s enormous steel leap during the first decade of the twenty-first century, when the output more than quadrupled, from 151.6 Mt in 2001 to 638.7 Mt in 2010.
Nobody anticipated such a dramatic increase: a 1999 paper authored by Chinese experts forecast 330 Mt of steel in 2010 and 650 Mt by 2030 (Lo et al., 1999), but the latter total was surpassed already in 2011. Early phases of this remarkable expansion included the construction of hundreds of small furnaces (with internal volumes of just 200–500 m3) whose relatively inefficient operation required 700 kg, or more, of coke per tonne of pig iron (Okuno, 2006). Small sinter plants (average area of less than 60 m2 compared to 200 m2 in the EU and nearly 350 m2 in Japan) were also commo
n, as were electric arc furnaces with capacities of no more than 30 t. Many large furnaces have been constructed since 2005, but by 2013 China still had 19% of blast furnaces with volumes less than 1000 m3 (compared to the global average of 4%) and 59% of furnaces larger than 2000 m3, compared to the global mean of 79% (VDEh, 2013).
The highly fragmented state of China’s steel industry is best illustrated by the fact that by 2010 the country had about 1200 steel producers, of which only some 70 were medium- and large-sized enterprises, and all of the major ones, except for Shagang Steel, were state owned (Tang, 2010). But larger companies have been rising in the global rankings: in 1990 China had a single steel company among the top 25, in 2000 it had four, and in 2013 it had 11 (WSA, 2015). Performance of these large producers has improved with the use of high-quality imported ores and high-strength coke and with the adoption of pulverized coal injection.
By 2005 the best mills, such as Baoshan Steel in Shanghai, operated with a coke rate as low as 290 kg/t, augmented with up to 200 kg/t of injected coal dust, very much in line with the best Japanese experience. China has some 8000 iron ore mines, but most of them are small and ship low-quality hematites (Fe content of just 30–35%) with a high share of impurities, and the country’s high dependence on iron ore imports has made it suddenly the dominant factor on the global market for the world’s second largest (after crude oil) traded commodity. This change was rapid: in the year 2000 China bought about 15% of all traded iron ore, by 2005 that share was up to 36%, and by 2013 it was 64% (WSA, 2014; Fig. 4.4).
Figure 4.4 Imported ore in Qingdao port (Shandong province) in China. Corbis.
Since 2010 the growth of China’s steel output has continued (albeit at a much reduced pace), with nearly 780 Mt produced in 2013 and just over 800 Mt in 2014, when China’s output accounted for 49% of the world’s steel. Unlike in other major steel-producing countries, all but a small fraction of China’s steel output comes from integrated enterprises, with electric steel contributing less than 10% of the total (8.8% in 2013). Of course, China’s infrastructural expansion has demanded unprecedented amounts of raw materials: nothing illustrates this demand better than the fact that in just 3 years China emplaced more concrete in its buildings, dams, and transportation links than the United States did during the entire twentieth century (Smil, 2013).
