Steel Industry
Foundries forced to cut output
(China Daily/Agencies)
Updated: 2009-10-16 08:03
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Steelmakers in China, the world's largest producer, will be forced to cut output in the next two months as prices continue to decline because of oversupply, Jiangsu Shagang Group Co said.
Prices may drop by between 5 and 10 percent for the rest of the year, Shagang Chairman Shen Wenrong said in an interview in Beijing. The Zhangjiagang-based steelmaker is the nation's fifth-largest mill and the biggest maker of steel wires and rods used in construction.
Steel prices in China have dropped 25 percent since reaching a 10-month high on Aug 4, as overproduction offset rising demand created by government spending. Wuhan Iron & Steel Group, China's third biggest, may carry out annual maintenance which will reduce output, Wuhan General Manager Deng Qilin said this week.
"Prices will drop further until a large number of the steelmakers record losses," Shen said. "Overcapacity in flat products is worse than long ones. That would hurt bigger steelmakers because they are the major producers of flat products," he said.
Flat steel products are used to make automobiles and appliances and long products are used in construction. Shagang is privately owned.
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The demand gain is a "temporary reaction" to the stimulus and China still faces overcapacity in the steel industry, Chen Bin, head of industry coordination at the NDRC, said.
Mills in China may have the capacity to produce 700 million tons of steel a year, according to Wuhan's Deng.
