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Steel Sector in China Out of Doldrums
China's steel sector reversed the situation in which its profits had been declining for six consecutive years, and registered a three-fold increase in net profit in the first half of this year.
Strongly boosted by an increase in steel demand both on the home and international markets, and a hefty price hike for steel products, the sector reported a 5.43-billion-yuan profit in the January-June period.
"If measures to control steel output and promote exports continue to be successful, the whole-year profit is likely to reach 10 billion yuan," said Pu Haiqing, director of the State Administration of the Metallurgical Industry.
The steel sector's economic returns have been on the decline on a year-to-year basis since 1993, when the annual profit hit a record high of 29.4 billion yuan. In 1998, the sector's profits dropped to an all-time low of two billion yuan, and steel prices went down from a record high of 3,400 yuan a ton to 2,100 yuan.
Over-production and low efficiency long hampered the sector's long-term growth, said Wu Xichun, chairman of the China Iron and Steel Association.
China became world's biggest steel producer in 1996, when its annual steel output exceeded 100 million tons. Steel output has kept growing to reach 114 million tons in 1998.
However, China still has to import more than seven million tons of quality steel products each year.
China mapped out a strategic plan to curb steel output and improve efficiency early in 1999. Now, the measures have taken effect, and mitigated the imbalance of demand and supply.
In the first six months of this year, China produced 61.18 million tons of steel, 3.45 percent more than in the corresponding period of last year, but the growth rate dropped by five percentage points.
As a result, steel prices began to pick up in the second quarter. The factory prices for construction-use products surged 300-500 yuan to hit 2,900-3,000 yuan per ton in its high sales period. The average steel prices had stabilized at a reasonable level of 2,400-2,500 yuan by June.
"The market situation for steel products in the latter half of this year is quite optimistic.," said Pu Haiqing.
"We expect the national economy to grow at a fast pace in the latter half, and increased fixed assets investment and consumption will stimulate steel trade," Pu said.
Although there has been stagnancy in steel prices on the international market in recent months, the overall demand for steel products in the latter half of the year will increase as well, even though it will be weaker than in the first half, he added.
Combined steel consumption nationwide is estimated at 132 million tons for the whole year, experts predicted.
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