Chinese Steel mills urged to regroup, prices to drop

China View ( English Edition

BEIJING, April 24 (Xinhuanet) — Steel mills in China will face a hard time soon and the prices will see a sagging tendency as the government has decided to slow down the growth of the industry to ensure a sustained and coordinated development of the national economy.

An executive meeting of the State Council, chaired by Premier Wen Jiabao on April 20, approved a new development policy for the industry, which called on the steel mills to adjust product structure, reduce energy and resource consumption and enhance the competitiveness of their products by using new and high technologies.

The steel mills are also urged to regroup and adopt measures to prevent […] overexpansion of their production capacity.

Statistics showed there are currently more than 800 iron and steel firms in China. The Shanghai-based Baosteel is the largest one. Last year, it produced 12 million tons of steel. Other major steel producers include Beijing-based Shougang Iron and Steel, theWuhan Iron and Steel in central China’s Hubei Province, the Maanshan Iron and Steel in Northeast China’s Liaoning Province, the Tangshan Iron and Steel in North China’s Hebei Province.

Industry insiders predict that the new state policy is expectedto help lower the prices of steel, further cutting the profits of the steel enterprises.

The industry is estimated to lose 3 billion yuan (362.76 million US dollars) in profits this year after the State Administration of Taxation abolished the export tax rebate policy for billet on April 1.

The losses may rise further to 4.7 billion yuan (568.3 million dollars) if the administration decides to lower the export drawback policy for steel from 13 percent to 11 percent starting May 1.

Steel prices in the Chinese market dropped dramatically recently following a price hike in the first three months of this year as the domestic demand for steel declined after the government adopted the macro-control policy to ensure a “soft landing” of the nation’s overheating economy.

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