It is reported that the Chinese steel industry revitalization plan is deemed to help steelmakers get through the roughest time and break the long term blocks on the development of China’s after adopted in principle on January 14th by China State Council. The actual effect of the plan will mainly depend on the executive force of the Govs.

Statistics from China Iron & Steel Association shows that investments in steel sector reached CNY 285.9 billion during January to November 2008 and would exceed CNY 310 billion for the whole year, which would bring in new capacity of 50 million tonnes.

The latest data of CISA recorded 502 million tonnes of steel output in 2008. And steel export will largely descend by 21 million tonnes in 2009. On this condition, the steel industry is hard to maintain the same output with 2008 this year, and will suffer 160 million tonnes of overcapacity.

Some analyst point out the revitalization plan will be instrumental in controlling steel overcapacity, encouraging technology innovation, quickening merge and regroup, advancing the standard for construction steel and the percentage of domestic steel utilization, boosting the publication of steel futures and further adjusting customs duties for steel products.

Mr Zhou Tao, a steel analyst from Sinolink Securities, said the crux to reignite steel sector is to wash out obsolete capacity and found a withdrawal system. And measures on protecting market and controlling capacity could pull market situation to the bright side, if the wash-out wins fiscal supports.

Mr Zhou Xizen, a steel analyst of Citic Securities, thinks it is good news that the revitalization plan got passed, a witness to the country’s care on steel industry. But mills shouldn’t be overconfident about the real effects of the plan. It remains uncertain on the effect; though the plan has helped mills get rid of the worst time. At present, steel price shows sign of short-term rebound thanks to the plan.

Source: LangeSteel Date: 04 Feb 2009