Posted on 23 Oct 2008
China steel group cuts 2008 output forecast
China's steel production will barely rise this year, the head of an industry group said on Thursday, scaling back previous forecasts of 5-10 percent growth.
China would produce about 500 million tonnes of steel this year, up just 10 million tonnes from last year and short of earlier forecasts of 520-550 million tonnes, said Shan Shanghua, Secretary General of China Iron and Steel Association.
Production growth was grinding to a halt globally, he told a conference in Qingdao.
"Global steel production is expected to stop increasing in 2009, which will get supply and demand going again," Shan added.
China's steel sector, the world's biggest, is trying to absorb the impact of the global financial crisis, which has hit demand, as well as a Chinese housing slump and the passing of the Olympic games, which entailed a massive construction effort.
Top Chinese steel mills have cut output by up to 20 percent, causing iron ore to pile up at dockyards and shipping costs .BADI to collapse, and depressing the share prices of Australian and Brazilian miners that supply China's steel mills.
The downturn has driven spot ore prices below term prices for the first time in years, giving China's steel industry reason to hope that prices for term iron ore contracts for the fiscal year starting from April 2009 may finally retreat.
"It is time for the iron ore prices to return to a rational level," Shan said.
The conference in Qingdao unofficially kicks off annual pricing negotiations normally led by the world's top supplier, Vale of Brazil, and Chinese industry leader Baosteel Group, the parent of Baoshan Iron & Steel.
But Vale has angered Chinese steelmakers by requesting an unscheduled price hike just as the market was slowing, which Shan said had prompted China to block its imports.
"As this year Brazilian iron ore miner bilaterally terminated the contract and made new demands, should all the Chinese steel mills review the contracts signed with miners?"
Shan said China had found its own iron ore production to be sufficient to replace Vale's imports and stop prices rising. And he said China would take steps to build up its domestic iron ore production further.
"China will increase investment in domestic iron mines, raising domestic iron ore production, in order to replace imported ore and restrict the price increase of imported iron ore," Shan told a conference in the port city of Qingdao.
