Losses of Chinese steel plants are still expanding although the government has introduced an economy stimulus package, and the first half of next year will possibly be a crucial period for the recovery of China's steel industry, said Zhang Xiaogang, chairman of China Iron and Steel Association (CISA) and general manager of Angang Steel Group Limited.

 

"The global financial crisis has started to influence China's real economy, and the steel industry is one of the most severely affected industries, " said Zhang.

 

China's steel exports have been falling by large margins. From January to October, the exports of steels and steel billets dropped by 1.2 percent and 79.8 percent respectively on year.

 

Steel prices in the domestic market have slumped significantly, with that of hot-rolled and cold-rolled plates and coils by far both down over 40 percent from this year's high.

 

Under combined functions of sliding product prices, rising costs for iron ores and coking coal and dropping demand on both domestic and international markets, China's steel plants are currently going through a tough period.

 

For instance, Angang Group, the parent of listed Angang (000898.SZ), saw its October operating turnover down 16 percent from the intra-year peak in July to 7.842 billion yuan.

 

Zhang is optimistic that the government's four-trillion-yuan stimulus package will boost the steel industry as policies usually have lagging effects.

 

"There are still a lot of uncertainties for the steel industry," said Zhang: "We are not sure about the exact influence from the global financial crisis, as well as the price trends of iron ores and coal. Also, trade frictions with other countries may increase as steel demand shrinks in the whole world."According to Zhang Xiaogang, the first half of next year will be crucial to China's steel industry. First, March 2009 will see how much the government's stimulus package will influence the industry. Second, a batch of new steel plants will start operation in the first half of 2009.

 

Thus, the outlook of the industry next year will not be clear till next March to May.

Editor:    Ivy

M S N:   noble-ferroalloys@hotmail.com

E-mail:    tiandandan226@yahoo.com.cn

Write to editor: service@ferro-alloys.com