Steel mills in China are being urged to temporarily slash production, despite rising demand and exports in the sector, as part of efforts to put an end to price plunges in the domestic steel market since September.

The China Iron and Steel Association said yesterday that its more than 100 members especially producers of medium and thick steel plates and hot-rolled steel sheets have agreed to cut planned production in the fourth quarter of this year by more than 5 per cent.

Steel prices have gone down sharply in China in the last few weeks mainly due to the rapid growth of steel production and weak market confidence, according to officials at the association.

The comprehensive steel price index tumbled by 20.9 per cent at the end of September from a peak in March this year, according to the association's statistics.

The price of hot-rolled steel sheets in some regions went down by as much as 50 per cent in that period.

Now, the average steel price per ton in China is US$200-250 lower than in the US and European markets.

"The price plunges in the domestic market are temporary and we hope cutting production will soon rebuild market confidence," said Qi Xiangdong, deputy secretary-general of the association.

Statistics show China's export of steel products rocketed by 83 per cent year-on-year to 15.8 million tons in the first three quarters of this year. However, the nation's surging steel exports have caused concern abroad.

Sources from the association said the United States is carrying out an anti-dumping investigation of Chinese-made welded steel tubes.

"We are aware that our trade rows with other countries are expected to grow with the rapid growth of China's steel exports. We hope to resolve disputes through negotiations," said Luo Bingsheng, vice-chairman of the association.

"However, China should export steel products in a reasonable volume as we have been the world's biggest steel producer for many years. We will remain a net steel importer this year, despite hikes in steel exports in the first three quarters," Luo said.

Currently, only 5.8 per cent of the total steel products made in China are for export, much lower than the 50 per cent in Russia, and 35 per cent in both Japan and South Korea, he said.

The association has formed a "co-ordinating team" for its members' production of medium and thick steel plates and hot-rolled steel sheets, which have been hit the worst by price reductions.

The "co-ordinating team" is expected to extend to other categories of steel products in line with market development, the association said.

China's output of finished steel products surged by 25.8 per cent year-on-year to 268.8 million tons during the first three quarters of this year, according to statistics.

Meanwhile, the nation's demand for steel products grew by 19.3 per cent to 273 million tons.

China's crude steel output reached 255.3 million tons in the period, up 27.4 per cent.

The growth in Chinese steel makers's profits have slowed sharply this year due to price plunges as well as soaring costs of raw materials, power and transportation, the association said.

Statistics showed year-on-year growth in profits in the first half of this year stood at 27.2 per cent. But the nation's top 68 steel makers reported 65.3 billion yuan (US$8.1 billion) in profits from January to September this year, up just 11.73 per cent from the same period a year ago, according to the association.

China imported 20 million tons of steel products in the first nine months of this year, dipping 16.4 per cent from a year earlier, according to statistics.

Luo predicted China's total crude steel output will be 340 million tons this year, up from 273 million tons last year.

Steel output will continue to grow next year, but at a much slower pace than this year, he said.

Source: China Daily