Beijing likely to enforce steel mill capacity curbs

Beijing: China, the world's largest steel producer, faces "severe oversupply" and the government is likely to decide on capacity curbs by the end of the year, according to the nation's third-largest mill.
The government is working on plans to close obsolete mills, advance mergers and reduce the number of iron ore importers, Deng Olgin, the general manager of Wuhan Iron & Steel Group, said in an interview with Bloomberg yesterday in Beijing.
Steel prices in China have dropped 23 percent since reaching a 10-month high on Aug. 4, as overproduction offset rising demand created by government stimulus spending. Some steelmakers have incurred losses at current prices, Deng said.
"The government will impose strict measures to effectively close outdated mills and boost consolidation," Deng, also the chairman of the China Iron and Steel Association, said while attending the World Steel Association annual meeting. "We bigger players will surely benefit from such a move."
Chinese steel prices probably won't rebound in the rest of the year, Deng said. Hubei province-based Wuhan Steel may carry out annual maintenance which will reduce output, he said, declining to give details.
Demand may expand by 19 percent this year to 526 million metric tons, the World Steel Association predicted this week, thanks to Beijing's industry-led $586bn stimulas package. Growth may slow to 5 percent next year, it said.
Mills in China may have the capacity to produce 700 million tons of steel a year now, Deng said. The overcapacity is affecting Wuhan Steel's expansion plans, he said.
The National Development and Reform Commission, China's top planning agency, is unlikely to approve a feasibility report on Wuhan Steel's planned 10 million-ton steel plant this year, Deng said. Without the approval, Wuhan can't start construction at the project at Fangcheng Port in the southwestern province of Guangxi, he said. [14/10/09]

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