Steel production to be cut to avoid price fall
(Xinhua)
Updated: 2005-10-26 10:10

China's major steel producers plan to cut their production by 5 percent in the fourth quarter in a bid to avoid the further price falls, Economic Information Daily reported on Tuesday.

The 48 steelmakers, which include the state-owned giants Shougang and Shanghai-based Baosteel, as well as some privately-run steel firms, reached the agreement at a recent conference organized by the China Iron and Steel Association.

Baosteel, China's largest steelmaker, said that it would reduce production by 380,000 tons during October-December period.

According to the report, China's steel prices saw a sharp fall since April.

The price of hot-rolled steel plunged by 50 percent to below 2,800 yuan per ton, said Luo Bingsheng, vice chairman and secretary-general of China's Iron and Steel Association.

Beijing-based Economic Observer reported that currently, around 80 percent of the country's steelmakers, whose products are used for construction, reported losses since October, citing Ma Zhongpu, a researcher with the Beijing Lange Iron and Steel Research Center, as saying.

Citibank also warned in a report released on Oct. 19 that all of China's iron and steel enterprises will suffer losses if steel prices go down by a further 13.6 percent in the latter half of this year compared with that in the first half.

Ma, quoting the bank report, noted that China's iron and steel industry faces the risk of plunging into another round of recession like the one which hit the country between 1996 and 2002.

It was reported that Chinese Premier Wen Jiabao has asked the State Development and Reform Commission to conduct market research and work out policies so as to stabilize the steel market.

The State Council Development and Research Center predicted that domestic demand for steel will grow 12-14 percent this year, compared with 20 percent in 2004, while the country's steel output hit 255 million tons in the first nine months, a year-on-year increase of 27.4 percent.

Currently, China's production of iron and steel has overtaken the domestic demand against the backdrop of a tightening macro-control policy aimed at cooling down the overheated economy, which grew 9.5 percent in the first quarter.

Steel prices in China saw dramatic rise and fall fluctuations this year.

The price soared to a record high after China accepted a 71.5 percent price hike for iron ore in an agreement with international suppliers in February.

It began to fall after the central government adopted a series of macro-control measures, including lowering the export rebate taxes for the steel industry from 13 percent to 11 percent starting May 1 and abolishing the export tax rebate policy for billet starting April 1.

There are more than 800 iron and steel firms in China. Their combined steel output is projected to climb to 350 million tons this year.

The Chinese government wants to step up the regrouping of these enterprises to build several conglomerates each with an annual output capacity of 30 million tons, said Luo Bingsheng.

The goal is to better utilize resources to sharpen the industry's competitiveness in the international market.