According to China’s National Development & Reform Commission, steel industry has continued to post robust growth in January to may 2008 bolstered by rising steel prices. The sector has realized a total profit of CNY 142.6 billion in the period up by 50.8% YoY from same time of last year and the growth rate gains 12.2 percentage points from that of January to February.

According to Shanghai Securities News, China's steel output amounts to 216.11 million tonnes in the first five months up by 9.4% YoY or 18.63 million tonnes from the year ago. However, the growth rate dips 10.5 percentage points on YoY comparison. Meanwhile, steel export has dropped considerably as a result of export tax adjustment and strengthening yuan.

The report also reveals that steel exporters are inclined to circumvent the new export tax policy. For example, commercial wired rod/bar and angle/section shipment has fallen 45.9% and 37.9% in the first four months respectively due to the export duty, while those tax-free alloyed bar and section export has soared 170.9% YoY and 240.6% YoY respectively. It's the same case with steel plate export.

Domestic steel price has risen swiftly in the first half, with steel price index up 31.49 points or 25.1% from the year start to 156.86 in late May. The price rally has been underpinned by high growth rate of national overall economy and fixed-assets investment and spiking raw materials prices as well. The benchmark ore price rises 65% to 71% and coke price doubled to CNY 2400 per tonne. Moreover, surging international steel price has also lent support to domestic price. By the end of May, international steel price index jumps to 268, up by 55.5% YoY from same time of last year, 17.1 percentage points higher than domestic price rally.

NDRC said that investment in iron and steel sector has shown sign of rebounding in the first five months. Steel investment has increased 22.4% YoY to CNY 96.55 billion in the review period, gaining 17.5 percentage points from the growth rate of last year.

Steel mills have stepped up efforts in consolidation while leading mills are scrambling to set up Greenfield plants in coastal regions. However, M&A in the sector are mostly restricted within the same province, therefore, the mills would have limited capability to optimize the resource deployment across the country.

(Sourced from MySteel.net)