China's Energy Strategy: Economic Structure, Technological Choices, and Energy Consumption

American and European steel industries. A good example was the agreement between Capital Iron and Steel and the Belgian giant Cockerill. Cockerill constructed a new wire-rod mill with a capacity of 1.2 million tonnes per year for its Walfield complex just before the world steel industry went into deep recession in the late 1970s and decided to shut it down in the early 1980s, as a part of restructuring program. Capital Iron and Steel purchased the mill, along with 2.5 million tonnes per year of upstream steelmaking capacity, at a price of $28 million, which was about one-seventh of the construction costs Cockerill incurred. Overall, China was relatively successful in relocating foreign equipment and facilities. It took the Anshan complex, for example, less than twenty months to dismantle, transport, assemble, and recommission a 0.5 million tonne per year second-hand mill, which started operation in 1987, from the Fairless Works of U.S. Steel.

Technical renovation projects, combined with improved technologies embodied in new production facilities from basic construction projects, raised the technological level of China's iron and steel industry significantly. Several indicators in table 6.12 illustrate the pace of technological progress during 1981- 1987. In ironmaking, the utilization coefficient of blast furnaces increased by 21.8 percent, from 1.47 to 1.79 tonne/m3.day, and labor productivity rose by 34.3 percent. In steelmaking, the output share of outdated OHFs and side-blown converters declined by 8.7 percent and 5.1 percent, respectively. In steel finishing, the continuous-casting ratio increased from 7.1 percent to 12.9 percent. This technological progress was a major contributor to improved energy efficiency in China's iron and steel industry between 1981 and 1987.

China's iron and steel industry increased its energy efficiency significantly in the 1980s. Between 1981 and 1987, the industry reduced energy consumption per tonne of crude steel by an average annual rate of about 3 percent, saving more than 2 million tsce of energy a year. The energy savings came from three main sources: (1) a reduction in the iron-to-steel ratio, (2) improved energy management, and (3) technological progress. Quantifying the exact amount of savings from each source is difficult because they were overlapping activities and occurred simultaneously. For example, one way to reduce the iron-to-steel ratio is to change the production process from OHF to EAF. Introduction of new equipment and processes is often accompanied by changes in operations as well. Some energy-efficient measures, such as better control of the air-fuel ratio in reheating furnaces, may require installation of additional equipment (e.g., a computer).

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