10 Sep 2010 10:32

China's steel mills face a tough H2

Zhangjiagang. September 10. INTERFAX-CHINA -China's steel mills need to adopt measures to control crude steel output and stabilize falling steel product prices in the second half of year (H2), a senior official with China Iron and Steel Association (CISA) said at a Sept. 9 conference.

There is currently an oversupply of steel products on the market and demand will fall in H2, so Chinese mills must strictly control their production, Luo Bingsheng, executive deputy president of the CISA, said at the Second China Steel Industry Development Strategy Seminar in Zhangjiagang, Jiangsu Province.

In the first seven months of 2010, China produced approximately 375 million tons of crude steel, up 18.25 percent year-on-year. Daily crude steel output reached around 1.77 million tons in the same period, up 13.85 percent year-on-year.

Apparent crude steel consumption stood at roughly 356 million tons in the seven-month period.

However, consumption of crude steel in each month was continuously falling on a monthly basis, according to Luo.

Luo noted that steel product inventories grew rapidly from January to July, giving rise to the falling steel product prices for the last three months.

He added that the cancellation of export tax rebates on certain steel products will see exports of such goods decrease in the next five months. This will add further pressure to the problem of domestic oversupply, Luo said.

Luo added that rising production costs and falling steel product prices have pushed profits down for Chinese companies.

However, Chinese steel mills also made some progress in the first seven months of the year.

According to Luo, the structure of the steel product industry was more optimized, and from January to July China output a total of 467 million tons of steel products. Of these, 178 million tons were high-end flat products and 208 million tons lower-end long products, representing 38.26 percent and 44.56 percent of total steel products, respectively. During the same period last year, flat products accounted for 35.23 percent of total steel product output, and long products 47.02 percent.

Meanwhile, consolidation of the domestic steel industry is well underway. In the first seven months, the combined crude steel output from China's top ten steel mills amounted to 167 million tons, 44.58 percent of the country's total crude steel output. In the same period of 2009, the combined crude steel output from China's top ten steel mills was around only 40.73 percent of the country's total output.