Innovation Blog

Nickel Pig Iron (NPI):  Here come the Chinese, We told you so!

By Shlomo Maital

I hate people who say, “I told you so!”.  So do we all.

But, hate to say it,   we told you so.    We told you the Chinese were hell-bent on moving up the industrial food chain, to higher-value-added innovative products.

Here is an example.

According to the Toronto Globe and Mail  (B1, B4,  Report on Business Weekend, June 12/2010),   Chinese iron producers have found a way to capture the $21 b. nickel pig iron business, taking business away rapidly from large producers like those in Canada’s Sudbury region.

The Chinese use electric furnaces, rather than blast furnaces, and cheap ore,  to produce pig iron with 10-12 per cent nickel content.  This is vital for making high-qualty stainless steel.  Normally  the product is sold for its nickel content, and stainless-steel producers add their own pig iron to it.  But the innovative Chinese process provides the nickel, and throws in high iron content for free.  It’s a winning value formula, one that is hard to compete against.   China’s thousands of stainless-steel producers now buy their nickel pig iron at home, rather than import it.    Chinese producers’ production costs are now as low as $7 – $8 per pound, and there are now 70 firms producing the innovative nickel pig iron.

Why did not the large nickel iron producers abroad innovate, when supposedly, China is traditionally a low-cost commodity producer?

What we see in nickel pig iron will replicate itself across a great many industrial products in the near future.   Those Western producers who are sound asleep will get a rude awakening, and soon.   China is not just about low cost.  It is now about value-added innovation.