HANGZHOU, China — China’s vast steelindustry is a major target of President Trump. But this hulking shell of a millhere shows why China is likely to keep pumping out more and more steel,inflaming trade tensions between the two countries.
The Hangzhou steel mill, a vast labyrinthof blast furnaces, warehouses, chimneys and worker dormitories coveringhundreds of acres, was one of Mao Zedong’s favorite projects. Built in just 13months in the late 1950s, it once employed 25,000 workers.
Pollution and the march of progress madethe mill a liability. But closing a mill eliminates well-paying jobs — acentral reason China keeps factories churning out steel the world doesn’t need.
When authorities do manage to shutter aplant, it is a costly ordeal, as the story of Hangzhou shows. With the help ofa $34 million grant from government officials, the Hangzhou plant owner,Hangzhou Iron and Steel Group, offered the 12,000 remaining workers lavishseverance benefits and pensions.
“I don’t have to wake up early,” said Tang Guomin, 49, who hadlabored at the blast furnaces since he was 18 years old. He received nearly sixyears’ pay from the company as severance and when he turns 50 in a few months,he will be able to collect an inflation-adjusted pension from the governmentequal to 90 percent of his previous pay for the rest of his life.
“I sleep till I wake and don’t have much to worry about,” he said,while doing his family’s morning vegetable shopping at a street market. “I missthe factory, but that time won’t be back again.”
Invoking an obscure trade law, PresidentTrump signed an executive order on Thursday for a 270-day review to determinewhether steel imports were harming national security. If the CommerceDepartment does find harm, Mr. Trump will have up to 90 days to decide whetherto impose broad import restrictions.
China is an obvious target of the order,though the impact could ripple worldwide. While only about 2 percent ofAmerican steel imports come directly from China, global steel makers andindustry experts blame China for shipping its surplus steel to other countries,which drives down prices and prompts those countries to further process thesteel into high-value products for export to the United States. The Trumpadministration, which has made it clear that it will take a more aggressivestance on steel, has suggested it could bring trade actions against thosecountries as well.
China denies that it sells excess steel toother markets below the cost of making it, a move called dumping. But Chinadoes concede that it has too many steel factories making too much steel.
The trick is trimming that excess capacity,which is proving to beneither easynor cheap. Steel making represents a reliablesource of high-wage jobs in a country where economic growth has slowed comparedwith previous years. Steel also remains a key material for China’smanufacturing sector, the world’s largest.
“Steel is the food for China’s industry,” said Wang Guoqing, theresearch director at the Lange Steel Information Research Center, a Chineseindustry group in Beijing. “It is in a key position for China’s development andinfrastructure.”
The steel industry in the United Statesemploys about 140,000 people, or less than one-tenth of 1 percent of theAmerican work force. China’s steel makers, by contrast, employed 4.7 millionworkers in 2014, the last official figure released, or 0.6 percent of China’slabor force then. Nearly 60 years after Mao’s drive to make China a steel giantcontributed toa faminethat killed millions of people, the country now makes asmuch steel as the rest of the world put together.
Selling Steel
China’s quarterly steel exports havelargely surged since the financial crisis. But exports have dipped lately asChina’s own steel use has increased.
Today, China’s steel sector represents thesort of bloated, wasteful industry that people both inside and outside thecountry say is holding back economic development. China in early 2016 committedto closing steel mills representing 100 million to 150 million tons of capacityover five years, or roughly a tenth of its capacity then. China closed 65million tons of capacity last year and plans to close another 50 million tonsthis year, according to a speech in early March by Premier Li Keqiang.
Yet production remains stubbornly high, andnew mills have continued to open. China’s steel mills produced a recordquantity of steel last month. China hasn’t released more recent data on totalsteel capacity.
For now, China’s steel exports areshrinking, though it isn’t clear how long that will continue. China’s appetitefor steel has improved in recent months as government lending and spending anda revival in its property industrylift the economyand encourage consumption.But the government has said it wants to rein in lending, concerned that theeconomy may be too reliant on ever-rising debt.
Mr. Trump’s advisers are using steel aspart of a broader push against China’s excess factories. They are singling outsteel while blaming Chinese industrial policies for overcapacity in othersectors, like aluminumand solar panels.
“To me the objective is to make it uneconomic, to make it expensive,to do something that has inefficiency in the market,” said Robert Lighthizer,Mr. Trump’s nominee to become United States trade representative, at his Senateconfirmation hearing.
China calls that effort shortsighted,saying it has made itself an indispensable provider of high-quality steel tothe world at a time when many American steel mills are aging. Advocates of amore confrontational American trade policy fail to understand this, said Li Xinchuang,the dean of the China Metallurgical Industry Planning and Research Institute, agovernment agency.
“I have explained this time and time again, but they won’t listen,”he said. “It’s like playing the lute to a cow.”
The Hangzhou steel plant, and the city thatit is named after, represent China’s effort to shift its economy away fromindustries like steel. The city of at least 4 million urban residents is thehometown of Alibaba, the Chinese e-commerce giant, and also contains theheadquarters of Geely, the Chinese automaker thatbought Volvo from Ford in2010.
Workers at the Hangzhou steel plant, a vastlabyrinth of blast furnaces, warehouses, chimneys and worker dormitoriescovering hundreds of acres.CreditGiulia Marchi for The New York Times
The former factory looks a little like apostapocalyptic scene on a Hollywood movie set: cavernous warehouses molderedon a damp spring day, windowless and doorless. Conveyor belts and other steelequipment that might have scrap metal value had already been removed, leavingbarren concrete tubes and walls. A long row of black hopper cars rusted on arailroad siding.
Migrant construction laborers camped in theevening in a dilapidated, three-story concrete building, resting after a longday of tearing apart old buildings as the next step in clearing the site. Tallgrass, leafy bushes and even small trees had begun growing vigorously in openareas of the factory, sometimes pushing their way up through cracks in concreteplazas.
“It looks beautiful,” said Le Rong, a 42-year-old migrant workerinvolved in dismantling the complex. “I even told my wife and kids about it.”
A Hangzhou Iron and Steel spokesmandeclined to discuss what the company would do with the site, saying it had notyet been decided but that the company would find an “innovative” use for theland. Former steel mill sites in other prosperous Chinese cities like Hangzhouhave often been redeveloped as real estate projects.
Train tracks at the plant, where cargotrains transported materials up to a year ago.CreditGiulia Marchi for The NewYork Times
Some of China’s steel plants are outdatedand many of them are polluting. Revamping them isn’t cheap. In addition to the$34 million it received to close the Hangzhou plant, Hangzhou Iron and Steel in2015 received nearly $106 million in subsidies and cheap government loans tohelp cover overall costs of upgrading its plants.
For many locals, closing the mill has meantcleaner air — the reason officials said the mill was shut down.
State-run media said shortly before theHangzhou mill closed that the aging site had been releasing 7,000 tons a yearof sulfur dioxide, an important cause of acid rain, and 3,000 tons a year ofsoot.
Xu Yuemei, another retired steelworker,said that when the factory was still operating, garments that she hung on aclothesline turned black or yellow before they dried. Mr. Tang remembers apervasive haze.
“There was dust in the air; I couldn’t see guys 100 meters away fromme,” he recalled. “I could smell choking ammonia gas in the air until thefactory shut down.”
“After it shut down,” he said, “everything is gone, including thepollution.”