News

China March steel output hits record   18 Apr 2008

Reuters

Chinese steel mills produced a record 44.87 million tonnes of crude steel in March as producers boost output to chase rising domestic prices, although higher costs are hurting margins, analysts said.

Last month's 11.5 per cent year-on-year rise in production was the highest since October, although first quarter output was up only 8.6 per cent, slowing from last year's 15.7 per cent pace, figures from the National Bureau of Statistics showed on Thursday.

The March steel output figure would equate to an annual rate of 528 million tonnes for 2008, in line with industry estimates that the world's largest steel maker will produce 520 million to 540 million tonnes this year, up about 10 per cent from last year.

Analysts said the increase in steel production, mostly from the country's major mills, was likely to continue in the next several months.

But several uncertainties, including possible shutdowns ahead of the August Olympics, cloud the outlook for the second half and a significant pickup in output growth is considered unlikely.

"High steel prices in China are spurring more production by the big players, which have advantages in material sourcing, as they aim to grab a larger share of the market, while improving margins at smaller mills too," said Macquarie analyst Henry Liu.

"But I do not feel we will see significant growth in China's steel output this year, as we can expect some production restrictions during the Olympics, although we cannot yet estimate how big they will be," he said.

 Beijing may ask steel mills around the capital city, which will host the 2008 Summer Olympics, to shut down to help improve air quality during the Games.

 Hebei Province, which surrounds the city, is home to dozens of steel mills that produce one-sixth of China's crude steel.

 China's raw coal output recovered in March to 211 million tonnes, up 17.5 per cent from a year earlier.

 Macquarie's Liu said he expected coal production to rise further in April, as several mines restarted production last month after temporary closures early in the year and were expected to have reached nearly full capacity by the end of the month.