Govt may tell steelmakers that big is not better

SHANGHAI: China, the world's largest steel producer, may pull back from encouraging steelmakers to get as large as global leader ArcelorMittal, as it directs mills to focus on improving product quality, a government advisor said.

"We want them to focus on upgrading technologies, product quality and environmental standards," said Li Xinchuang, who is helping to draft a new steel policy as head of the China Metallurgical Industry Planning and Research Institute. "Big is not necessarily good. ArcelorMittal suffered too much last year."

The rethink underscores China's efforts to close obsolete plants and tighten credit to prevent overcapacity from depressing prices and hurting profits at steelmakers including Baosteel Group Corp. ArcelorMittal, formed from the industry's largest takeover in 2006, may post a $389 million loss for 2009 after the recession cut demand, according to analysts' estimates.