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News Release from: MEPS (International)
Edited by the Engineeringtalk Editorial
Team on 31 January 2006
China takes larger slice of global steel
sector
Results now starting to come through for 2005 are serving to reinforce the accelerating importance that China has now assumed in the global steel sector.
Results now starting to come through for 2005 are serving to reinforce the accelerating importance that China has now assumed in the global steel sector China's crude steel production last year was just a few thousand tonnes shy of the 350 million tonne mark
This article was originally published on Engineeringtalk on 4 Nov 2005 at 8.00am (UK)
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The country's share of world total output rose from just over 26% in 2004 to almost 31% in 2005.
Its own production growth was partly responsible for the higher share, but reduced output in other countries also played a role.
China, however, continued to power ahead.
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Its 2005 output of crude steel was up by almost 25% year on year.
This was supported by domestic production of iron ore that rose by a similar percentage, and by a jump in pig iron production of no less than 28% over 2004.
India was the only other major steelmaking nation to show a significant increase in production last year.
Indian crude steel output rose by nearly 17% to just over 38 million tonnes.
It has a long way to go before it becomes the next China, but India recently adopted a national steel policy that will seek to raise production to over 100 million tonnes by 2020.
Foreign investment is being encouraged.
As to China's prospects for 2006, it is a brave forecaster who predicts that steelmaking growth will slow down.
All the experiences of the last few years show that China has the capability to far exceed most steel forecasts.
However, some signs of a deceleration are definitely there.
Already by December 2005, year-on-year growth in crude steel production had slipped to 16%.
The Chinese Iron and Steel Association is said to be expecting this year's output to be only about 12% more than in 2005 at 390 million tonnes.
Fear of excess capacity is growing.
This is piling downward pressure on steel prices and compressing producers' profits.
One manifestation of their declining profitability is the effort by the mills to play a bigger role in negotiating benchmark iron ore prices this year.
The Chinese clearly fear that Japanese and European mills do not have quite the same incentives to cut input costs at this time.
The Chinese authorities have said they want to consolidate the industry into fewer, larger groups, and eliminate smaller inefficient plants.
This policy is proving difficult to implement.
Some consolidation is taking place - China now has more than 20 steel companies producing over 4 million tonnes per year each.
But it may be cost pressures, rather than orders from Beijing, which eventually force closures among the inefficient small-scale mills.
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