The Chinese steel producers lost more than 100 billion yuan ($15.5billion) last year said the industry association. Chinese government is under immense pressure from the EU to drastically cut its steel production. Chinese government planning to shed 5,00,000 ( half a million) jobs till 2020. These job losses are bigger than the total work force of 3,28,000 workers directly employed in the European steel industry. European politicians blame China for the plunging prices and excess capacity threatening the steel industry worldwide. The Chinese steel production grew 700 % (seven fold) 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 2008 global financial crisis. The private investors also built new plants in China to make profits from ever rising prices and demand. In 2014, China was producing 820 million tonnes a year which was about half of the world production and seven times more than the second biggest producer, Japan.
But domestic demand started to fall as China’s building boom begun to wane and growth slowed, causing commodity prices to plummet. World export prices for steel have fallen more than 70% from all time high of $1,113 per tonne in July 2008 to just $321 in March 2016. China can now produce nearly 1.2billion tonnes of steel each year, but the local demand is around 700 million tonnes. The surplus production exported to foreign markets. According to China steel and iron research institute “ China exported 100 million tonnes of steel products in 2015, which is double than the export of last year”. Only 6 million tonnes went to Europe according to the World Steel Association figures, which is the tinny proportion compare to to the total intra- European steel trade of 100 million tonnes.
This overcapacity and low prices forced the Chinese government to reduce the production and shut down some plants, which means job losses. The Chinese regime provide protection to the steel giants mostly state owned to avoid large scale lay offs. But present situation will led to the layoffs of about half a million workers. Chinese regime also worried about the unrest of the laid off workers. Chinese regime wants to reduce the production capacity between 100 to 150 million tonnes. Ratings agency Fitch said 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 government says it will cut some 1.3 million jobs.
Industrial unrest is anathema to China’s ruling Communist Party, and last month it clamp down on a protest which brought the city of Shuangyashan to a standstill. The powerful protest of thousands of miners in the city was a little glimpse of what is going to happen as the result of economic slowdown in China and continued financial crisis in EU and possible recession in world economy on a much bigger scale in China. China is one of the most authoritarian state in the world, where little dissent or protest is dealt with brute force. Chinese regime is one of the most repressive in the world. Despite the repression from the state, the workers still organised protests and strikes against the anti workers policies of the government. The 4,000 steel workers who have been laid off in steel city Tangshan fear the similar crack down. The workers laid off by state owned Guifeng are protesting the lay offs. Some protesting workers already arrested by the police and they are threatening the other active workers to be arrested if they continue the protest. One of the protesting workers told the media that he and other workers will not be able to find the other job. We will be unemployed for a long time. We are worried how to feed the families. So that’s why, we are protesting here despite the arrests and harassment from the police.
The further weakening of the Chinese economy will force the regime to sack hundreds of thousands of workers from different sectors. That will open the floodgates of the workers protests and strikes. Chinese regime so far able to put billions of dollars in the struggling firms and companies to save the jobs and to avoid the possible job slaughter. But it will be difficult for the regime to maintain the status-quo for a long time.