China in metal industry - Essay Example

China in Metal Industry Introduction: Current records reflect that China’s steel output exceeds 100 million tons in a year on average and the country is now the world’s largest producer of steel (Hu & Ping, n.d., p.1). The present study focuses on the role of China in the metal industry before and after joining the WTO considering the physical market, the price discovery, and security and risk management.Role of China in the Metal Industry:Before and After Joining WTO:With the liberalization of trade in the 1990s, the metal industry in China has been found to go through several reforms trying to improve the state of the industry.

Earlier the control of China’s metal industry was under the State Owned Enterprises (SOEs) where the key SOEs worked under the policies of the central government and the local SOEs were under the influence of the provincial government. China’s membership in the WTO had posed several challenges for the country considering the weaknesses in comparison to other countries in the world. However the country depended on mergers and acquisitions of steel companies but doubts still persisted as to whether the country would be able to compete in the international market (Hu & Ping, n.d., pp.2-3). The Chinese metal industry has been found to violate several commitments of the WTO.

Violating the norms, the Chinese industry has not stopped its ownership and control over the production of steel. This has been mostly achieved with the intervention of the government that plays a significant role in the decision making even after China joining the WTO. In fact after joining the WTO, the intervention of the government has increased contrary to the commitments of the WTO. Violations have also been observed in the treatment and providence of the SOEs (Metals and Mining Chinese Steel Industry, 2011).

Physical Market, Price Discovery, and Risk Management:Slowdown of growth in the Chinese market may bring concerns over the demands of steel along with other products. The LME (London Metal Exchange) realizing the state of the China metal industry decided to spread out its warehouse set-up into China that it considers as the largest user of base metals together with copper. This has been thought to bring in benefits for both the Chinese industry as well as the LME (Sim & Li, 2012).China has proved to be a leading producer of rare earths, tungsten and molybdenum in the world and over the last two years the country has imposed strict taxes over the exports of these elements leading to price rises (Rare Earths, 2012).

China is also the largest consumer of copper, aluminium, and zinc, in the world and plans to limit new aluminium merging base metal production. The demand for base metals can be expected to increase in China (Research and Markets: Analyzing Base Metals in China - 2011 Report on One of the Worlds Biggest Consumers of Copper, Aluminium and Zinc, 2011). Keeping in focus the security and risk management issues, the China metal industry has been expected to make a shift from the concept of mergers and acquisitions to domestic consolidation “with deals materializing at a fast pace in 2011”, with which the number of transactions is also expected and found to be increased (CFO Innovation Asia Stuff, 2011).

Conclusion: From the study it can be concluded that China has been continuously trying to improve and prove its position and power in the metal industry that can be reflected from the management and influences over the industry in the world as a whole. References1) CFO Innovation Asia Stuff (2011), China’s Metal and Mining Industry to Focus on Domestic Consolidation, cfoinnovation, available at: http://www.cfoinnovation.com/content/chinas-metal-and-mining-industry-focus-domestic-consolidation (accessed on May 11, 2012)2) Hu, X. & H. Ping (n.d.), Globalization and China’s Iron and Steel Industry Modelling China’s Demand for Steel Importation, faculty, available at: http://faculty.

washington.edu/karyiu/confer/xian05/papers/hu%26ping.pdf (accessed on May 11, 2012)3) Metals and Mining Chinese Steel Industry (2011), industrytoday, available at: http://industrytoday.com/article_view.asp?ArticleID=F359 (accessed on May 11, 2012)4) Rare Earths (2012), The New York Times, available at: http://topics.nytimes.com/top/reference/timestopics/subjects/r/rare_earths/index.html (accessed on May 11, 2012)5) Research and Markets: Analyzing Base Metals in China - 2011 Report on One of the Worlds Biggest Consumers of Copper, Aluminium and Zinc (2011), businesswire, available at: http://www.

businesswire.com/news/home/20111223005162/en/Research-Markets-Analyzing-Base-Metals-China-- (accessed on May 11, 2012)6) Sim, G. & S. Li (2012), LME Wants Warehouses in China as Asia Growth Lifts Demands, businessweek, available at: http://www.businessweek.com/news/2012-05-03/lme-wants-to-expand-warehouse-network-to-china-ceo-abbott-says (accessed on May 11, 2012)