China Mulls New Steel Policy

(Caixin Online) A new set of policies concerning the development of China's steel industry is expected to be released by the end of June, according to an official from the Ministry of Industry and Information Technology.

The official, who is unwilling to be named, disclosed over the weekend that the new policies include nine chapters and 40 articles that make rigid requirements in various aspects of the steel industry that include use of equipment, energy conservation and pollution reduction, and mergers and acquisitions.

The official said the ongoing drafting of the Twelfth Five-Year Plan for the years 2011 to 2015 will follow the guidelines set by the new steel industry development policies, which warn that industry development needs goals that look beyond production growth figures.

Debates on China's steel industry capacity have been heating up. The county's estimated steel production in 2015 is expected to reach 710 million tons, with actual consumption to be 650 million tons. Some industry experts believe that China's steel industry is currently experiencing temporary overcapacity.

An official from Jiangsu Shagang Group said that it is still too early to say the industry has an issue with overcapacity. "Take Shagang as an example, long steel products are now very profitable, but flat products are profitless."

An internal source from Anshan Iron and Steel Group believes that the current production growth has been absorbed by the market. "On the one hand, some say there has been overcapacity and restrictions on new projects. But on the other, market demand is increasing under heavy investment incentives. The result is that companies have room for growth and development." In a market economy, competition is inevitable, as is temporary overcapacity, said the source.

Some representatives from steel companies in the vast central and western region believe steel demand in the region will continue to grow. "The current supply from Chongqing Special Steel Co. can not meet the demand," said a source from the Chongqing-based company.

An official from Panzhihua Iron and Steel Group in western Sichuan Province stated that some underdeveloped regions have inadequate steel production. Therefore, government agencies should consider the specific situation when making industry policies, giving supports to the companies which have secured resources supply and market demand.

(Translated by HW)

Full article in Chinese: http://business.caing.com/2010-03-03/100122152.html