Chinese Steel Firms target Africa
Chinese steel firms are on the buying spree to capture major African mines, which acts as the source of raw materials for the booming Steel Industry. A recent buyout of Africa’s second largest iron ore mine located in Tonkolli, Sierra Leone by a major Chinese state owned Shandong Iron and Steel Group is the best example, how vigorous the firms are. On the other hand, Chinese firms are cashing it out while the stocks are inexpensive. Hebei Iron and Steel group is constructing a massive steel plant in South Africa, with an approval to takeover Swiss firm Duferco’s African steel processing and sales network.
The motive behind is quite suspicious as the Chinese firms want to shift the air pollution from its homeland to major African countries. Officials in China are busy in closing down the rustic factories located in the country. Convincing Chinese Iron and Steel Association to do business in Africa perfectly relates with the environmental concerns along with governments motive to pour in investments in the continent.
Experts question the economic motives behind the move, as Chinese steel firms are already overloaded with high production of crude steel in the world at 822 million tonnes a year, more than whole world combined. To the current economic crisis, Chinese steel is at all time low leaving the commodity market in the country to shatter. Rather moving the sector out, China has to shrink its massive production lines.
The reason behind Chinese firms making inroads into African market, due to surge in demand for steel in the continent in the coming years, expected to bring 3 million tonnes per year starting 2050. Following the trend Chinese have captured a major source of Iron ore and basic Steel in Africa that can catapult the production. Over dependency on Australian Iron ore has lead deep impact due to mining duopoly of Rio Tinto and BHP Billiton, which has staggered the prices.
Furthermore, Chinese have a longtime strategy in African markets. Since, it acts as a newcomer into the market it wants to stick at it as opposed to the traditional practices from the firms belonging to Great Britain and France, which have their roots from the past colonial days. Chinese would love to encash the opportunity, but yet they need to prove their reliability. They rely on good behaviour during the crisis despite loosing the money in the short run would yield better contracts for the future.
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