Heat Treat Industry News

Dec. 3 (Bloomberg) -- The Chinese government is studying a “more feasible” plan to tackle steel overcapacity in the world’s largest producer of the metal, the Ministry of Industry and Information Technology said.

The ministry is working with other departments on details including speeding up mergers, closing obsolete plants, pushing technology innovations and regulating iron ore imports, Jia Yinsong, an official at MIIT’s raw material division, said today at a conference in Beijing. Jia is reiterating earlier comments by other officials.

A severe steel oversupply is overwhelming demand spurred by the government’s $586 billion stimulus spending, leading to high inventories, according to Chinese producers including Wuhan Iron & Steel Group. The steel overcapacity has led to excess iron ore imported to feed the mills, helping to drive up costs, the China Iron & Steel Association said.

“China shouldn’t seek to be the world’s steel supplier because it’s short of raw materials and energy resources,” Xiong Bilin, deputy director at the National Development and Reform Commission’s industry department, said at the conference.

Crude-steel output in China may rise 14 percent to 570 million metric tons this year, Xu Lejiang, chairman of the nation’s biggest producer, Baosteel Group Corp., said today at a separate conference in Beijing. The nation’s steel capacity may have reached 700 million tons or higher, the commission’s Xiong said. The commission, known as the NDRC, is the country’s top economic planner.

Iron Ore Imports

The government is planning measures to close plants in the steel, aluminum, coke, cement, paper and utility industries, the Ministry of Environmental Protection said Nov. 13. The NDRC is seeking to address the slow pace of consolidation in industries with overcapacity, it said Nov. 27.

China may import 70 percent of its iron ore needs this year, up from 50 percent last year, Baosteel’s Xu said. Contract prices for the steelmaking ingredient may rise 15 percent to 20 percent next year to the second-highest on record, China International Capital Corp. said Nov. 17.

Imports may climb to 600 million tons this year up from 444 million tons in 2008, Reuters reported today, citing a MIIT statement released at the conference.

Investment in China’s steel projects has risen 3.8 percent in the first 10 months from a year ago, MIIT’s Jia said. Investment in the cement industry surged 64 percent and in the flat glass industry by 35 percent for the same period, the ministry said.

China’s steelmakers posted 37.6 billion yuan ($5.5 billion) of profit in the first 10 months, while cement producers had 22.3 billion yuan, the reform commission’s Xiong said.

The cement industry has 27 percent of obsolete capacity, MIIT’s Jia said.

--Helen Yuan. Editors: Tan Hwee Ann, Indranil Ghosh.

To contact the Bloomberg News Staff on this story: Helen Yuan in Shanghai at hyuan@bloomberg.net

Last Updated: December 3, 2009 03:26 EST

By Bloomberg News

For more information on our services, please contact us via e-mail

Robert Gutierrez - RGutierrez@HoustonHeatTreat.com
Mark Tate - Sales or Technical assistance - MTate@HoustonHeattreat.com

or call us at 281-590-9600.