Companies

Steelmakers may cut production on weak demand

By Helen Yuan (China Daily)
Updated: 2010-06-09 09:49

SHANGHAI - Chinese steelmakers are likely to cut production in the third quarter because of "weak" demand from auto and appliance makers, according to the nation's second-biggest mill.

Customs inspectors collect iron ore samples imported from Iran in Rizhao Port, Shandong province. China increased iron ore imports by 42 percent to a record 628 million tons in 2009. [CHEN WEIFENG / FOR CHINA DAILY]

Slower demand may prompt smaller makers to default on iron ore contracts in the third quarter, Baosteel Group Corp Chairman Xu Lejiang said on Tuesday at the Bloomberg Businessweek Green Business Summit in Shanghai.

"Many steelmakers will cut production or carry out maintenance in the third quarter," Xu said. "Steel demand from automotive and home appliance industries has become weak. Iron ore costs will be the highest in the third quarter."

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Mills face a "difficult" second half, Xu said last month as concern increases that measures to curb speculation in the property market will trim demand. Baoshan Iron & Steel Co, Baosteel's publicly traded unit, cut prices on June 4, the first time in eight months.

"Many Chinese steelmakers are either losing money or close to losing money," Michelle Applebaum, who runs a steel-research firm in Highland Park, Illinois, wrote in an e-mail on Tuesday. "The timing on iron ore price increases in the coming months is very poor for many of China's higher cost smaller steelmakers."