Supply Exceeding Demand, China's Steel Market Sluggish

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Last updated at: (Beijing Time) Thursday, May 23, 2002

Supply Exceeding Demand, China's Steel Market Sluggish

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In the first quarter of this year, affected by supply-over-demand overseas steel market and protective measures by some countries, China's steel export declined and import increased. The price remained low and enterprises were damaged generally. It is predicted the second quarter is to see still more pressure on import and more difficulties in export.

Due to sharpened trade rows on international market, the general price level stayed low and China exported 33 percent less than that of the same period of previous year. While the impact of imported steel on domestic market entered a substantial stage with a rise of 17.5 percent.

Statistics show that China's steel output, after exceeding 150 million tons last year, continued to grow in the first quarter, over 20 percent higher than the same period of previous year. Experts say this year may see a growth of 20 million tons to bring the total production to over 170 million tons.

Since the production exceeded 100 million tons in 1996, China's steel output has been remaining world first but, in contrast with this, the ill balance between supply and demand has caused price drop, leaving little profit margin for enterprises.

Officials with the State Economic and Trade Commission pointed out that the international market will continue to see over supply this year. The over production capacity would reach over 10 percent and steel price is unlikely to rebound, according to the International Iron & Steel Institute. On domestic market, the production capacity is also growing faster than that of demand.

Besides, the US's limitation on steel import has added fuel to trade rows and the EU started to grant tariff quota for steel importing. Japan, ROK, Thailand and Brazil are also considering similar protective measures. Meanwhile one can see a sharp rise of anti-dumping cases and most China's exported steel would face various limitations and anti-dumping charges.

Under all-side pressure, China's steel import continues to grow, a result of China's WTO entry, which requires tariff cut and cancellation of import quantity limitation. More than that, after world main steel importers adopted protective measures, the over supplied steel may rush into China at a low price, and the currency devaluation in Japan and Argentina would comparatively raise their competitiveness for steel exporting.

By PD Online Staff Member Li Heng

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