Excess capacity, low industrial concentration and a lack of access to natural resources have long plagued China's steel sector. These problems have been exacerbated by the impact of the global financial and economic crisis.

When China's State Council, or Cabinet, approved a "rejuvenation plan" January 14 to support the troubled industry, the immediate aim was to deal with the effects of the crisis. However, analysts said, it could also ease the industry's long-term structural problems.

Since the plan was announced, construction steel prices have risen about 60 yuan (8.78 U.S. dollars) to about 3,650 yuan per ton in Beijing and Tianjin, according to Mysteel, a steel information service company.

Prices had been rising since the government's 4 trillion yuan economic stimulus package was announced in November.

From Jan. 14, when the industry package was announced after the market closed, and Monday, the Shanghai Composite Index rose 3 percent. Meanwhile, shares in the biggest steel producer, Baosteel, were up 2.5 percent while the No. 2 producer, Angang Steel, saw its stock rise 3.6 percent.

Chu Xueliang, an analyst with China Jianyin Investment Securities, said the support plans would help solve the persistent problems of excess capacity, low industrial concentration and a lack of raw materials.

(Xinhua News Agency January 22, 2009)