How China's steel boom has been dangerous

How China's Steel Boom Turned Deadly

Chinese authorities say they are on track to achieve GDP growth of around 8% this year and fall dire predictions of massive unemployment leading to social unrest is not verified. But last week's killing of a steel company executive of striking workers in northeast China underlines the ongoing threat of labor unrest, even as the country shows signs of news from the economic slowdown.

Friday thousands of workers in state Tonghua Iron and Steel Group in Jilin province protested the planned takeover of his employer held by the private Jianlong Steel, according to reports in the Chinese press and from Hong Kong-based Information Center for Human Rights and Democracy. Some of the steel workers rioted and kill Chen Guojun, a Jianlong representative. Jianlong previously had bought a stake in Tonghua, and also feared that a takeover of the company will add thousands of Tonghua employees. "Chen disillusioned workers and provoking them by saying most of them will be fired in three days, says Tonghua a policeman named Wang, according to state-run China Daily." Chen says that the total number of 30,000 employees would be reduced to 5000, angry crowd.

Friday violence occurred as the outlook for China's steel industry turning. The government's $ 586 billion stimulus package has a massive infrastructure building fun and creates a huge demand for steel. In June, crude steel hit nearly 50 million tonnes - 6% higher than the year before, according to World Steel Association, and almost all-time high. "Demand has exploded in the first half of this year as a result of the government's stimulus package and bank loans," says Jim Lennon, a Macquarie Bank analyst. "Steel demand is enormous.

But the massive demand is only a temporary respite for Chinese policymakers. During the last decade, China has quickly built new steel mills, and in 2002 became the world's largest producer of the item. Now, Chinese authorities said that the country has more capacity than the markets at home and abroad can support. In February Luo Bing Heng, Secretary General of China Iron and Steel Association, said that China's steel production capacity in 2008 exceeded the domestic demand of 500 million tonnes with a further 160 million. China's State Council has called for a consolidation of the industry to better manage production, with five major manufacturers absorb 45% of production in 2011. See photos of Chinese investment in Africa.

Similarly, the government wants to reduce the number of major car manufacturers from 14 to 10, and consolidate the estimated 5,000 cement producers. Such restructuring should leave China with stronger, more stable industries. But the process will be painful. Workers often find themselves not much to say in the process, with few chances to negotiate a better severance or retraining, "said Geoffrey Crothall, spokesman for Hong Kong-based China Labor Bulletin, a worker' rights NGO." Job cuts and consolidation of itself no problem. That is how the process is completed, "says Crothall." What has happened in many years, privatization and restructuring of SOEs, the sale of state assets and the merger of state-owned companies have almost always been made behind closed doors? Workers never involved, they are only presented with an ultimatum. People are angry not only because of their lack of input, Crothall says, but often because the process is marked by corruption. "Workers have no idea of the true value of the assets being privatized," he said. "Very often they accuse the leadership - right in the May event - of embezzling assets in the league name of corrupt officials.

In case Tonghua Iron and steel, it seems that the steel industry's turnaround helped spark the riot. Jianlong had invested in the company in 2005 but then withdrew from the Tonghua lost money midst global slowdown this spring. But as China's steel demand has risen, Tonghua showed a surplus of $ 6 million last month, renewing Jianlong interest. After the death of Jianlong representative on Friday, local authorities announced the appointment was canceled, China Daily reported.