China to see huge steel surplus: report
(Asia Pulse)
Updated: 2005-12-01 15:52

IRON ORE BATTLE

China's domestic crude steel capacity would climb to 360 million tonnes next year from 340 million tonnes in 2005, despite delays in the start-up of several new plants, the report said.

Sliding prices come as Chinese steel mills are campaigning to restrict likely increases in 2006 iron ore prices from the world's top miners, including Brazil's Companhia Vale do Rio Doce (VALE5.SA), after a 71.5 percent hike this year.

While mills call for price cuts, miners are gearing up for price rises of up to 20 percent ahead of talks in January.

China's surplus has seen the country's steel prices dive an average of more than 30 percent since peaking at 10-year highs around the end of March.

China's biggest steel maker, Baosteel, last week announced larger-than-expected price cuts of up to 25 percent for steel products for the first quarter of 2006.

China Steel Corp. (2002.TW), Taiwan's largest steel maker, followed suit, unveiling average price cuts of 10.4 percent for the first quarter and blaming excess capacity from the Chinese mainland.

The center said output of iron ore in China, the world's top importer of the raw material, would rise 15.5 percent to 448.7 million tonnes next year, thus easing supply concerns. Coke output would grow 3.3 percent to 235 million tonnes in 2006.

"Demand growth for iron ore will slow and imports will not increase sharply," the think tank said. "There should be no problems regarding iron ore supply."

Official data showed Chinese iron ore imports jumped 32 percent to 221.23 million tonnes in the first 10 months of 2005, while output grew 31 percent to 318.96 million tonnes.