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Ailing steel industry cheered by construction projects (2)

By Wang Ying (China Daily)

13:13, September 12, 2012

Zeng's caution was echoed by Wang Guoqing, deputy director of the Lange Steel Information Research Center, an industrial consultancy based in Beijing, who emphasized that the expected demand for steel to be brought about by the projects will only be gradual.

The new projects are scheduled to start construction this year and last until 2020, so the industry will have to be patient to see any real effects, added Wang.

However, according to Zeng, the expected slow release of demand will also be good for the industry.

"The last wave of infrastructure investment did pick up the economy immediately - but it generated a negative effect, in that the lavish spending on infrastructure and property has only led to a severe overcapacity of many industries including the steel industry," he noted.

China's crude steel output was 500.49 million tons in 2008, but the amount surged to 683.88 million tons in 2011, up 36.64 percent within three years, according to Lange Steel figures.

Wang Xiaoqi, CISA's vice-chairman, was quoted as saying on in late August that the industry has entered one of the most difficult times in its history, with steelmakers earning just 1.68 yuan for every ton of steel they produce, according to the average price for the first seven months of this year.

Of the 80 steelmakers tracked by CISA, 30 fell into the red in the first seven months, with losses totaling 1.7 billion yuan.

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