Fixed asset investment in China's steel sector, the biggest in
the world, fell to 33.2 billion yuan (US$4 billion) in the first
quarter of the year, down 278 million yuan (US$33.6 million) or 1.4
percent from the same period of last year, according to the China
Iron and Steel Association (CISA)
yesterday.
"The decrease was the positive result of macroeconomic control
policies and will help curb blind expansion of low-level production
capacity in the sector," said Luo Bingsheng, vice-chairman of the
association.
The reduction was in sharp contrast to staggering year-on-year
growth of 106.4 percent in the first quarter of 2004, a year when
it was one of the most overheated industrial sectors, along with
aluminum and cement, boosted by high prices and fat profits.
The steel sector was the only one of China's main industries to
experience a fixed asset investment decline from January to March
this year, said association officials.
Zhou Xizeng, analyst with CITIC Securities Co Ltd, predicted
that investment in the steel sector would continue to decline this
year due to State economic policies. "Investment was excessive last
year, and it should be further cooled down," he told China
Daily.
Fixed asset investment in the steel sector surged to 178.08
billion yuan (US$21.51 billion) last year, an increase of 26.9
percent from 2003. Steel output reached 77.79 million tons during
the period, up 23.83 percent on a year earlier.
However, Luo said domestic steel production still grew "too
fast" in the first quarter of this year, generating continuous
supply shortages of iron ore, coal and power.
"We should stay vigilant to prevent the resurgence of
overinvestment this year," said Luo.
"However, we should continue to support large- and medium-sized
companies' attempts to move into high end products, such as
cold-rolled steel sheets, which are in short supply in the domestic
market," he added.
China's top 68 steel companies reported 25.04 billion yuan
(US$3.02 billion) in profits in the first quarter of this year, up
18.58 percent from a year ago, but Luo said growth of profits
should decelerate this year because of mounting costs.
The world's three main mining groups - BHP Billiton, Rio Tinto
and Companhia Vale do Rio Doce - raised iron ore prices by 71.5
percent this year, increasing costs for Chinese steel firms by some
13 billion yuan (US$1.57 billion), he said.
China saw 319 percent more steel exports and 46 percent less
imports from January to March this year, mainly due to domestic
steel prices being lower than prices on the international
market.
"Exports will be restrained but imports boosted this year by a
shrinking gap between prices in the domestic and international
markets since late last year," predicted Luo.
China is considering reducing its steel export tax rebate from
13 percent to 11 percent, to control steel shipments overseas.
(China Daily April 28, 2005)