Economy

Steel output likely to increase

By Zhang Qi (China Daily)
Updated: 2011-01-12 14:14

BEIJING - China's crude steel production is estimated to be as high as 628 million tons in 2010, up 10.7 percent from 2009, despite factory shutdowns in an effort to meet the 11th Five-Year Plan (2006-2010) energy-savings target.

Custeel.com estimated the 2010 steel output in late December, according to a release from China Iron & Steel Association (CISA).

The nation's steel capacity is expanding fast, though the government is making efforts to reduce overcapacity.

Steel output will still go up this year along with iron ore imports, said the report.

China will have added new capacity of 40 million tons, and the steel production capacity could reach 800 million tons this year, the report from Custeel.com released on Tuesday said.

The steel output rebounded in December after it fell 9 percent in September, caused by production cuts due to factory shutdowns to meet energy-saving targets.

China, the world's largest iron ore buyer, imported 616.8 million tons of ore in 2010, down 1.4 percent compared with that of 2009, the first drop in 12 years, according to data from customs on Monday.

Related readings:  Baoshan Steel 2010 profit more than doubles  Chinese steel mills pay $26b more for iron ore imports  Giant steel firm forges ahead  China's Laiwu Steel rejects merger with Jinan Steel

Analysts said the decline in iron ore imports is mainly due to short supplies from big miners, as they sold some proportion of ore to the European market which has recovered from the economic crisis, and on increased production of domestic iron ore propelled by surging import prices.

China's iron ore imports, however, rose 1.2 percent from the previous month to 58 million tons in December, the highest in nine months, according to the data from customs, as steel mills restocked raw materials fearing a price rise.

Prices for 63.5 percent iron ore remained firm at $181 a ton on Monday including freight, after hitting an eight-month high on Jan 7.

"Iron ore imports will rebound this year, as the demand from Europe is not strong, but the prices may fall as big miners have expanded production capacity," said Hu Kai, a senior analyst from Umetals.com.

"Chinese steel mills have been replenishing stocks of iron ore ahead of the Chinese Spring Festival in early February, as they are concerned that prices may rise," he said. Steel prices are also increasing due to surging raw-material prices and stocks of steel products. Coking coal and iron ore supplies from top exporter Australia have been disrupted by massive floods.

Baoshan Iron & Steel Co Ltd, China's biggest listed steelmaker, will raise its key product prices for the second straight month in February, including hot-rolled coil and cold-rolled coil, by 100 yuan ($15) per ton for February bookings.

Shanghai rebar futures rose to a two-month peak on Monday, indicating that ore prices have room to keep gaining as Chinese demand lifted key metal indexes to their highest since May, according to analysts.