China's steel industry faces reshuffle (2)

Industry experts say that low industry concentration and huge steel stockpiles are the main reason behind this.

Wang Xiaoqi, vice president of China Iron & Steel Association, said, "Over production and low concentration of manufacturers have led to our low prices in the steel market. Everyone is engaging in a cut-throat competition, which further presses prices down to the 1994 level. The true solution to this matter, we will have to obsolete some factories with low competence."

Statistics show the profit of steel industry is at its 10-year low, with production costs, raw materials, fuel, and labour costs all going up faster than the price of steel. The government wants this round of restructuring to follow market economy rules, which means production according to demand.

Zhang Dechen, director of Raw Material Dep't, Ministry of Industry & IT, said, "The focus is to support big steel companies to carry out cross region M&As. It also aims to reduce the number of steel manufacturers, close down some factories. "

The policy also aims to optimize the structure of production, and enlarge the economy of scale. Customs data shows that China’s iron ore imports have surged by more than three times from 2003 to 2011, but the price has risen about four times during this period.

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