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High Steel Prices Begin to Bend
Prices of steel products on the Chinese market have begun to dip. According to sources with the State Administration of Metallurgical Industry, the average price of steel products has declined by 7 per cent to 8 per cent.
In coastal Shanghai, China's largest economic powerhouse, prices of steel products for building materials dropped to about 2,500 yuan (US$301) per ton from nearly 3,000 yuan (US$361) per ton.
Huang Jingan, deputy director of the administration's industry management department, attributed the price decrease mainly to government intervention.
To subdue skyrocketing steel product prices, the government closed out part of its steel product reserves, especially in Shanghai Municipality and in Shandong and Zhejiang provinces.
The government also allowed some steel producers to put more steel products on the market.
"At the same time, prices are expected to stabilize to ensure the producers' profits,'' Huang said.
Prices of steel products have substantially increased since mid-April thanks to the steel sector's resolute efforts to control steel output.
During the first quarter of this year, the average price of steel products increased by 80 yuan (US$9.60) from the end of last year.
"Originally, the price increase amounted to a reasonable recovery from a slump during previous years,'' Huang said in an interview with Business Weekly.
But some dealers built up steel product stocks to drive up prices and earn windfall profits.
Prices of low-grade steel products exceeded 3,000 yuan (US$361.4) per ton in some regions.
Exorbitant prices will undermine the sector's efforts to control output and close down small steel plants and will restrain demand for steel products.
The sector plans to slash output by 10 per cent and shut down more than 100 small steel plants nationwide to achieve a profit of 10 billion yuan (US$1.2 billion) this year.
But some steel enterprises have relaxed controls and expanded production which threatens to trigger a reoccurrence of steel oversupply.
Other closely related fields, including machine-building and ship-building sectors, have suffered significantly from price hikes.
Huang warned the dealers to be sober-minded and not to hoard steel products, adding that the government has an ability to keep prices at a normal level of about 2,500 yuan (US$301.20) per ton.
"What they should do is join with producers to maintain hard-won stability on the steel product market,'' Huang said.
The sector's profits slid to 2.5 billion yuan (US$301 million ) last year from a record high of 29.4 billion yuan (US$3.5 billion) in 1993 because of low prices.
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