This is a guest post kindly submitted by Brad Pritts, Technical Director of Unibond, a longtime reader of our blog QualityInspection.org, who often contributes to conversations around the topic of my articles. A big thanks to Brad for this content…
Let’s talk about the Chinese steel industry… from a few perspectives.
Unibond has been producing brake shoes in the USA since 1952. In 1999, we expanded production in China, and, to this day, produce brakes in both countries. We produce high volume models in our US plant, and medium to lower volume models in China. This allows us to capitalize on more complex equipment and tooling for the high volume models, while using simpler, but more labor-intensive techniques for the models we build in China. Some models are run in both locations, allowing us to shift back and forth as market conditions change. Using the right steel is “mission-critical”, so we take our steel purchasing seriously on both continents. In this article, I will tackle the question of whether Chinese steel products ‘can be trusted?’
Who makes steel? Who buys it?
Not surprisingly, China is the biggest steel producer in the world. In recent years they have produced over 1,000 million tons per year! But only a small portion is exported – less than 10% in recent years. China’s steel producers have been kept busy making steel for China’s own consumption, including megaprojects such as their well known high-speed rail system.
The US produces “only” about 75 million tons of steel annually and imports another 25 million tons. The US’ biggest steel suppliers are Canada, Brazil and Mexico, accounting for about half of the imports. Prior to the section 232 trade sanctions imposed by the Trump Administration, China furnished less than 3% of the steel imported by the USA. In 2017, for example, China was the #10 source for the US and fell off the top 10 in 2018 with the imposition of tariffs. Even Italy sells us more steel than China!
All steel is not created equal!
To the outsider, “steel” might seem simple. Inside the industry, it is a different story. Making and using steel is a complicated business. The questions buyers may ask include:
- What is the chemical makeup? – How much iron, carbon, and a variety of alloying elements such as nickel, chromium, and manganese?
- What are the mechanical properties? – This is related to strength, hardness, and machinability
- What further processing is performed? – Once the steel is produced at the mill a variety of steps are performed to make it ready for use.
- What is the grade? – The steel grade communicates the chemical composition, properties, fabrication processes, heat treatments and forms of steel. Grading is very important as it gives a standard language for effectively noting the properties of steel.
Even our “simple” heavy-duty brake shoes use different grades of steel for their components and a dozen different grades for our brake hardware.
Over the long term, the steel market is global and “efficient”, meaning that the price of steel products is highly competitive worldwide. When significant changes occur, it may take time for the market to adapt, but historically it has done so. So once quality issues and shipping costs are taken into account, costs are generally very similar worldwide. Of course, when price changes are driven by tariffs or other legal changes, the market can be distorted… as it is right now, with tariffs providing US steel producers “cover” to raise prices above world market level. In 2021, the combination of the tariffs and increased demand brought steel prices to all-time highs… but that’s a topic for a different article. (When the tariffs were originally imposed in March 2018, US prices started climbing the day before the public announcement… and they increased 20% to match the tariff nearly overnight.) Recent negotiations with the EU and Japan promise to end the US tariffs for most of the US steel trading partners, allowing domestic prices to improve.
What about the quality of Chinese steel products?
Here, the answer is that like many products in China, you can get whatever level of quality you are willing to pay for! The best Chinese steel mills achieve world-class quality levels… at the worst, quality can be terrible. Global quality leaders like Apple and Audi source material in China, and they’re well known for being demanding. Perhaps the biggest risk is using the wrong grade of steel, whether due to honest mistakes, fraud or anything in between. If the wrong grade is used, even the best quality in the world won’t make it right. Of course, human nature being what it is, these problems can occur anywhere in the world, as they did at Japan’s respected steel producer Kobe in 2018. We work closely with part suppliers and steel suppliers to ensure we are using optimal grades.
In producing brake shoes and other brake parts, using the right grade of steel is “mission-critical”, and we treat it that way. Our OEM customers consider the correct steel material a “safety-critical” quality characteristic. That’s because the strength of the part itself – especially the welds – depends on the grade of steel.
Some of the measures quality-conscious importers use include:
- Specifying grades that provide an extra margin of safety
- Sourcing steel consistently with a limited number of qualified mills
- Performing incoming lab tests on each batch at the factories using the steel; monitoring the steel producers’ quality results
- Visiting the steel production facilities, and reviewing their quality practices
- Sending random samples for independent lab testing
- Testing parts in the event of customer complaints
We also monitor quality closely in those operations where the steel quality or grade can make a difference such as in welding or heat treatment.
Does the Chinese government support the steel industry? Is China “dumping” steel?
While this has been alleged, it’s not the reason for the current steel tariffs. The author isn’t an attorney, much less an international trade law expert, so this article doesn’t claim to be the last word on this question. Having purchased Chinese steel products for 20 years, to me the picture is a mixed bag. On one hand, the Chinese steel producers are state-owned, and so enjoy politically controlled financing and government support. On the other hand, the most objectionable examples of government support such as export tax subsidies have been eliminated for sales of steel and similar materials. (These subsidies still exist for many steel products including brake parts— ouch!).
While enjoying support, Chinese steel producers also face obstacles created by the government. The steel industry is subject to increasing environmental controls. (At times of bad weather conditions, mills have been shut down for weeks or even months.) With the Olympics coming, similar shutdowns are likely so as to produce clear blue skies for the events.
Many of us have a simplistic view of the power of “command and control” of a state-owned economy, but in practice, it’s more complicated. For example, the Chinese steel industry is troubled by overcapacity. While the national government knows of the problem, individual provinces (think of state governments) are slow to shut down their local plants, keeping many less competitive steel producers alive despite the efforts of the central government. To date, little has been accomplished in this goal, despite years of pressure from the national leadership. Tellingly, the relatively few areas affected have been geographically close to Beijing. This calls to mind an ancient Chinese proverb: “The Mountains are high, and the Emperor is far away.”
Summing it all up…
Unibond has been producing brake shoes and hardware in China for over twenty years. From the start, we’ve developed and strictly enforced high quality expectations for our steel. We are proud of the work done by our Chinese supply chain, and proudly stand behind it!
About the author:
Brad Pritts is Unibond‘s Technical Director. Among other responsibilities, he has been the primary manager of Unibond’s Asian supply base since 2006. Earlier, he served as quality leader for an aftermarket auto body parts supply network in Taiwan and China, from 1999 to 2003. Pritts has been in the automotive industry since 1981, primarily in the quality field. He holds a B.S. (Ohio State University, 1975) and M.B.A. (University of Michigan, 1982).
Unibond produces brake shoes for the heavy-duty truck market in both the US and Asia; additionally, they import a full line of brake hardware. Unibond is based in Ferndale, Michigan and has been in business since 1952. Unibond is a wholly-owned subsidiary of the Deshler Group, a large privately-held manufacturer of auto parts as well as participating in several related industries.
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