This is the second exemption since China decided to adopt final safeguard measures on steel imports in November 2002.

Officials with the China Association of Iron and Steel Industries said the decision comes in response to short supply and high prices at home.

Domestic steel prices remained high despite big increases in this year's imports. China imported 10.92 million tons of steel plate in the first four months of this year, up 73.5 per cent year-on-year, customs data shows.

They said the exemption is expected to have little negative impact on China's steel industry because the safeguard measures have been in place for quite some time.

Domestic iron and steel companies are now more concerned with the ongoing anti-dumping investigations into imports of cold-rolled steel coil from Russia, South Korea, Ukraine, Kazakhstan and China's Taiwan, they said.

MOFCOM announced, in its preliminary judgment on Tuesday, that these regions have dumped cold-rolled steel coil on the Chinese mainland, but decided to put temporary anti-dumping measures on hold because domestic market supply is short at present.

If the need arises, penalties could be withdrawn before the final judgment of the case, said the ministry in its notice.

Whether, when and how much temporary anti-dumping tariffs MOFCOM will impose is expected to greatly impact China's iron and steel imports and thereby the steel industry, said officials with the industrial association.

China set in place temporary safeguard measures on steel, due to come into effect on Saturday, in response to the controversial US steel tariffs.

US President George W. Bush initiated the tariffs in March 2002 triggering a new round of trade protectionism in the global steel industry, with the European Union, Canada and Japan rushing to protect domestic markets from steel exports that might be diverted from the US.

China followed suit with temporary measures of six months in May, which were extended to three years upon their expiration in mid-November.

China's safeguard measures involve five categories of steel products; cold-rolled thin plate, hot-rolled thin plate, painted thin plate, non grain orientated silicon steel and cold-rolled thin stainless sheet.

The former Ministry of Foreign Trade and Economic Co-operation announced in January its intention to remove some products from the list from February 1 following a petition by domestic companies from other industries, such as household electronic appliances and auto manufacturers.

MOFCOM again expanded in early May non grain orientated silicon steel's quota between May 24, 2003 and May 24, 2004, to 939,425 tons from 739,425 tons, but made no changes to control rapid increases in imports from developing countries or to spread the quotas throughout the year.

Zhang Zhaojun, an industry expert with www.custeel.com, said China's steel imports, especially those from developing countries, are expected to remain at a high level over the next 12 months.