Iron and Steel Overview
The demand for steel highly depends on both global and national economies. Development and enhancement of sophisticated technology has improved both quality of product and productivity of work. Integrated mills require very high capital requirements and all mils are greatly affected by commodity prices. Another major force and focus for steel and iron industry include environmental regulations, which check the environmental impacts coming from mills (L e e, 2011). Advancement in technology have greatly reduced the demand for labor, with some Canadian manufacturers reducing the number of man-hours required to produce a ton of steel by 90% over the last 30 years.
Overview of Canadian Iron and steel Export
According to industry trade data on steel, Canadian producers shipped 12.4 million tonnes of steel in 2012, up 40% from 9.3% million tonnes shipped in 2011 but still 21% less than 2010 (Foreign Affairs and International Trade Canada, 2013). Year over year imports in 2010 increased by 47% to 8.7 million tonnes, while exports increased by 42% over the same period. The domestic consumption of steel in Canada stood at 13.5 million tonnes in 2010 up from 42 percent over the previous year but still 8 percent below 2009
Export of Canadian Iron and steel.
Data compiled by Natural Resources Canada for 2009 shows that the country exported about 31.1 million tons of iron ore with a value of $3,360.6 million, of which 37.3% was concentrates valued at $1, 037.3 million, while 62.7% was pellets valued at $2,323.3 million, representing an increase of 10.9% representing $3.1 million in total exports from 2008 (28.1 million tons. Even though export for pellets reduced by approximately 1.1 million tons (5.1$) from 20.6 million tons in 2008, total export for concentrates increased by 55.0% representing 4.1 million tons in 2008 (L e e, 2011).
Major export destinations
For 2009, the major export markets for Canada’s pellets were China (22.4%), the United States (12.2%), France (7.3%), and Singapore (7.0%) (Foreign Affairs and International Trade Canada, 2013). Iron producers in Canada are the lowest cost suppliers in pellets and concentrates to Lake Erie and Lake Ontario Ports, and are cost competitive at Baltimore and at Lake Michigan on the United States eastern seaboard. However, this competitiveness reduces as the distance of the markets it serves increases. The major competitors for iron pellets from the U.S. and Venezuela with Brazil, Australia, and Venezuela being the main competitors for concentrate market.
World Market & Canadian Export
The major global customer for the iron ore industry is the crude steel industry. World crude steel production has increased by 66% since 2001. This large increase in production has been because of steel required for the industrialization of Asia, particularly in China and India. India and China have increased their production of crude steel by 145% and 315 from 2001 to 2010 respectively (World Bank, 2012). The world demand for steel is expected to increase by over 6% to 1, 4441 million tons by 2013 followed by a further increase of 7% in 2014, reaching a new record high of 1, 6662 million tons.
The success of iron-ore export industry is closely related with the dooms and booms of the Chinese steel industry. China does not produce enough iron to cater to the needs of steel producers. Additionally, the comparatively low quality and high cost of locally mined ore have forced steel producers in China to rely heavily on imports from countries such as Canada. Being one of the top producers of iron ore Canada remains well positioned to as the best destination. World steel producers are venturing out to make long-term mining contracts and it is rational to presume that the demand for iron ore from Canada will receive a significant rise in the near future.
Canada is the third world’s largest iron ore producer after Australia and Brazil. Majority of iron ore from Canada comes from Labrador Trough area located in the northern Quebec. Canada is well positioned to compete with Brazil and Australia (World Bank, 2012). The major iron producer in Canada is Iron Ore Company of Canada. Other major producers include Quebec Cartier Mining Company and Wabush Mines.
Importance in Canadian Export
Iron and steel export of Canada is one of the fastest growing sectors in the country’s economy. Canada relies heavily on its international trade to support to sustain a high standard of living and national economy. Iron and steel continue to make significant contribution to international trade position of Canada in 2012. Mineral export accounted for 23.7% of the nation’s international trade position in 2012. In addition, the total mineral trade for Canada soared to $25.8 billion in 2012, and is projected to remain at elevated level in 2013 due to continued global demand and high commodity prices (World Bank, 2012).
Iron and steel industry is very significant to Canada. Mining and production of iron and steel is an important industry, and Canada uses advanced technology in the production process, but the mining and production process produces some negative environmental impacts. The Canadian government together with industry players has very good plans and control measures in place to check this problem, while ensuring smooth running of the industry. Iron and steel form the backbone of Canada’s economy Fenton M.D. (2012). Iron and steel helps in manufacture of essential machines that support other production units. This makes export of iron and steel one of the most important indicators of socio-economic development and living standards for Canada. The industry is large and technologically complex characterized by a strong backward and forward linkage in terms of material flow and income generation.
Trade Disputes with china
Canada and China have enjoyed a healthy and long-standing bilateral relationship. This relationship begun in the 1960s, with Canada exporting wheat to China. Currently, there are no trade disputes between the two countries. Many foreign companies have expressed their increased interest in buying Canadian mines. Wuhan Iron and Steel Corporation, the fourth largest steel producer in China has already announced its plans o buy mines across Canada in an effort to increase efficiency in terms of raw material required for steel production.
Recommendation
The increase in demand for iron and steel in China because of increased industrialization and technological advancement makes China an attractive market for exporting iron and steel. China has increased its production by 315%, which makes it an attractive market for exporting iron and steel. Chinese industry has received boom in steel industry over the last 30 years. In addition, China does not produce enough iron to meet the needs of the Chinese iron and steel industry. China does not have high quality and low cost locally mined ore, which makes it highly dependent on imports from countries such as Canada. China is one of the leading steel producers and therefore requires increased supply of iron and steel to meet the increasing demand for raw materials. This makes China the best export destination for iron and steel.
Conclusion
Iron and steel industry will continue to grow over the near future as technology advances and the demand for iron and steel increases. China has a well-developed iron and steel industry but lack quality and low cost iron ore. The increasing demand for raw materials makes it a suitable destination to export iron and steel. However, some Chinese companies have announced their interest in acquiring some Canadian companies producing iron and steel and this might reduce the demand for exported iron and steel as steel manufacturers venture into Canada.
References:
Fenton M.D. (2012). Fenton2012–Mineral commodity profiles – iron and steel. United States Geological Survey.
Foreign Affairs and International Trade Canada (2013). Canada-China economic complementarities study. Retrieved from http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/china-chine/study-comp-etude.aspx?view=d
L e e, M., 2011. Measurement of market power for the environmentally regulated Korean iron and steel manufacturing industry. Resources Policy in Press, Corrected Proof.
Russell, S. and William J. (2009). Steel production: processes, products, and residuals. Baltimore: John Hopkins University Press.
World Bank (2012). International Trade and Climate Change, 2012.
