Today, China is the world’s biggest producer of stainless steel. It is also the world’s biggest producer of ferrochrome, an essential ingredient for stainless steel production. However, China has absolutely no natural reserves of chromium ore, from which ferrochrome is produced. It bases its production of ferrochrome, and therefore of stainless steel, entirely on imports of chromium ore, the vast majority of which comes from South Africa.
In simple terms, China bases its economy on imports of raw materials and exports of value-added goods like stainless steel. South Africa, on the other hand, does the opposite: it exports raw materials (in this case, chromium ore), instead of processed goods. As a result, China has a significantly more diversified industrial base than South Africa, allowing it to modernize and develop itself at a much faster pace.
China does that by pursuing a protectionist policy which serves its interests. For instance, China has a 15% export tax on chromium ore. While China imports chromium ore, because it has no natural reserves of this mineral, it discourages re-exports of chromium ore through this export tax. In other words, China makes sure that all the chromium ore it imports will be used in China, to make Chinese stainless steel out of it.
China even has a 20% export tax on ferrochrome – so, although it is the world’s largest producer of ferrochrome, it discourages ferrochrome exports in order to support its own steel industry.
China’s protectionist policy is better understood when we take into account the fact that this industrial superpower imposes a 15% export tax on nickel ore, a 15% export tax on molybdenum ore, a 20% export tax on ferro-molybdenum, and a 40% export tax on stainless steel scrap. Everything that counts in the production of stainless steel, from nickel ore to stainless steel scrap, is discouraged from export in order for the Chinese steel industry to flourish.
South Africa, on the other hand, has no such restrictions on export put in place, except for a licensing requirement for exporting stainless steel scrap. Because of this, South Africa, who has the world’s largest chromium ore reserves, simply supports China to be the world’s largest producer of stainless steel. South Africa even supports China to be the largest ferrochrome producer in the world, which is equally astonishing.
To sum it up, China, who has no natural reserves of chromium ore, and who is totally dependent on imports, is the world’s largest ferrochrome producer. At the same time, South Africa, while having the world’s largest reserves of chromium ore, is only the second largest producer of ferrochrome in the world.
And when it comes to stainless steel, China is a superpower, while South Africa’s steel industry barely struggles to survive.
Because of this lack of protectionist policies, South Africa’s economy is not reaching, let alone fulfilling, its potential in many areas. This is the fundamental lesson we should learn when we contemplate the case of China.