Booming demand keeps Chinese domestic prices firm
Singapore 29 June 2007 10:43
Chinese domestic steel prices have not collapsed as feared after Beijing’s two recent export tax changes to curb the country’s steel export.
Despite the concerns of some steel analysts and the China Iron & Steel Association (Cisa) that the frequent steel export tax policy changes seen this year might result in turbulence in domestic steel market, prices in the past two months have in fact remained stable.
“Booming domestic demand has been a great help in all this, you can simply tell by looking at all the busy construction worksites in Chinese cities, and of course, Beijing’s action to close down the small-sized backward production facilities has also been a contributing factor,” commented a steel trader in eastern China.
A steel analyst in Beijing said the pressure of oversupply in China has been eased this year.
“China’s steel inventory has been relatively low this year because of the shutdowns of backward facilities and Beijing’s efforts to control fixed asset investments in the past two years,” commented Ma Zhongpu, steel analyst at ChinaCCM.com.
China revised export taxes on over a hundred steel products including longs, flats, pipes and tube some effective from June 1 and some from July 1.
“I know the market is widely worried about a sharp decline starting in July, but I simply doubt it. China’s steel exports will remain strong for some years as Chinese steel products are, and will still be, competitive in price, backed up by lower production costs,” said a steel trader in Shanghai.
In the past week some domestic steel prices inched higher. Rebar is up to 3,860 yuan ($508) per tonne from 3,700 yuan per tonne last week, wire rod is up to 3,800 yuan from 3,750 yuan, cold rolled coil up to 5,070 yuan from 4,980 yuan per tonne.
Market anticipates breakthrough on Anshan-Benxi merger
Singapore 29 May 2007 10:35
Chinese Steel analysts believe that there will be a breakthrough in the planned merger of Anshan Steel and Benxi Steel by the end of this year.
“I have heard that the Chinese authorities will finalise the detailed merger plan [of Benxi and Anshan] around June, and I believe that this year the government means it and there will be substantial progress,” said Xu Xiangchun, steel analyst with lgmi.com in Beijing.
A number of reports in the media suggested that the first step to translate the merger into practice will be the appointment of top management staff in Anben Steel. Next, the listed arms of the two groups will complete the takeover of all the steel assets under their wings. Finally the listed arm of Anshan Iron & Steel Group will absorb Benxi Iron & Steel Group’s steel assets and delist the listed company of Benxi Steel.
Officials from the two groups declined to comment.
The merger has been at a standstill beyond the formal incorporation of Anben Steel Group in August 2005. The two groups have been running as separate entities, with no concrete consolidation.But this year “concrete achievement will be made”, said Ma Zhongpu, steel analyst with ChinaCCM.com.
“Zhang Xiaogang, president of Anshan Iron & Steel, mentioned briefly some time this year that the State Council and the Liaoning provincial government have paid close attention to the merger, which was a hint that the authorities would accelerate the merger, and concrete progress would have to be made,” he said.
Anshan and Benxi are both state-owned companies, but Benxi belongs to the provincial government, whereas Anshan is under the supervision of Beijing, and this difference in ownership is probably the biggest hindrance, he said.
“It will cause a conflict of interests between provincial and central governing bodies, but once the government officials reach an agreement, it will be done with or without the willingness of the companies involved,” he said.
Other steel analysts suggested it is high time that Chinese steel mills realised the need for to accelerate consolidation in their long-term efforts to survive and improve.
“To remain competitive in the global market today and tomorrow China's large-scale steel mills have to grow big and strong enough, first via merging the smaller players in the domestic steel market ... and then to explore development opportunities in developing countries such as Vietnam, India and Africa,” said a third steel analyst.
Anshan Steel produced more than 15 million tonnes of crude steel in 2006, ranking third in China, and Benxi 7.55 million tonnes, ranking 12th among China's top steelmakers.
Baoshan Iron & Steel signs 6th long-term charter contract with MOL
Singapore 24 May 2007 10:14
Baoshan Iron & Steel Co has signed a 25-year charter contract with Mitsui O.S.K. Lines (MOL) to transport iron ore from Western Australia to Shanghai starting June 2007.
This is the sixth long-term transport contract between the two, and under the contract, MOL would build a 225,000-tonne ore carrier, which was expected to launch around late 2011 and early 2012, MOL stated.
The other five long-term contracts between MOL and Baoshan Iron and Steel are three 200,000-tonne coal and iron ore carriers that started service in January, March, and April 2007, a 230,000-tonne type vessel and a 300,000-tonne type carrier that will both go into service in early 2009, according to MOL.
Officials from Baoshan Iron & Steel declined to comment.Freight charges have been surging recently on robust demand for sea transportation, according to Ma Zhongpu, steel analyst with ChinaCCM.com in Beijing.
Shipment of iron ore from Brazil to the ports in Shanghai was charged at $55 per tonne as per May 11, double the average price in 2006, and from West Australia to the Shanghai ports at $24, also twice as much as the average last year, he said.
And the rising freight charges have prompted a number of China’s top steel mills to strengthen their alliance with shipment service providers by establishing strategic cooperative relationship or signing long-term charter contracts.
Beijing makes local officials responsible for cutting obsolete steel capacity
Singapore 15 May 2007 10:17
Beijing’s decision to make local officials responsible for clamping down on obsolete steelmaking plant has been welcomed by Chinese steel analysts, who believe it will expedite the removal of outdated capacity.
Ten provinces ― including Hebei, Beijing, Shanxi, Liaoning, Jiangsu, Zhejiang, Jiangxi, Shandong, Henan and Xinjiang ― all of which are major steel production bases, agreed on April 27 to get rid of a total 39.86 million tpy of pig iron and 41.67 million tpy of steelmaking capacity by 2010, with more than half to be demolished by the end of this year, according to the National Development and Reform Commission (NDRC).
NDRC has also posted a list of the backward capacity to be dismantled for the public to read on its website, alongside the schedule for each province.
Steel analysts are optimistic that the new measure will help complete the work as planned.
“Such a measure is feasible compared with the previous general guidelines, as there are specific targets, and Beijing has given each province a reasonably long period to complete the task,” said Ma Zhongpu, a Beijing steel analyst with ChinaCCM.com.
“Local officials have been reluctant to co-operate with Beijing in clamping down on the backward capacities, as most of the steelmakers, though maybe small in size, have been major tax payers in the provinces. But now, by linking the tough task with their own development, I believe few will dare to take the risk but to carry out Beijing’s policies,” he said.
Beijing aims to erase 30 million tpy of iron making and 35 million tpy of steelmaking capacity by the end of this year.
In the Chinese central government’s new steel policy, issued in July 2005, it said that it aimed to remove 100 million tpy of iron making and 55 million tpy of steelmaking capacity by 2010.
But little progress has been achieved since then, mainly due to lack of co-operation from the local authorities. This is despite Beijing’s repeated resolve to remove obsolete capacities and to optimise the utilisation of energy and raw materials and reduce pollution in the steel industry.
(关键字：路透社记者 采访 马忠普)
