Nine of China's steel companies have agreed to work together to help stabilize steel prices that have been on a steady decline since April, according to the China Iron and Steel Association (CISA) on Monday.

The nine companies, whose production capacity accounts for half of China’s total, are Shanghai Baosteel Group Corporation, Tangshan Steel Corporation, Anshan Iron and Steel Group Corporation, Wuhan Iron and Steel Corporation, Benxi Steel Company, Ma'anshan Iron and Steel Corporation, Baotou Iron and Steel Corporation, Kunming Iron and Steel Corporation and Panzhihua Steel Company.

In the first five months of this year, China's steel output increased by 25.43 percent. It imported 10.7 million tons and exported 9.37 million tons of steel.

Based on research and analyses, the group has come up with four proposals to address the continued decline of steel prices, and to carve out a transparent, fair and rational steel trade environment.

First, they propose to appeal to the relevant government departments to strengthen controls over the import of low-end rolled steel products and, if necessary, to adopt anti-dumping measures.

Second, they want to call on domestic companies to optimize production structures and to reasonably increase stockpiles.

Third, they object to steel companies publicizing any policy that guarantees value against price fluctuations or any retroactive policy that undercuts the market.

Fourth, they propose the revocation of trade agency licenses of those who manipulate market prices.

China's steel prices skyrocketed after Shanghai-based Baosteel accepted a 71.5 percent price hike for iron ore in an agreement with international suppliers in February.

But, prices nose-dived in April due to government macro-control measures to cool off overheated investment in the steel industry and market speculation.

Current prices of some steel products have dropped by 1,000 yuan per ton compared with Q1 (first quarter 2005) prices. Prices of certain products have fallen by 15 to 20 percent, further enlarging the international and domestic price differential. Prices of wire and threading steel have fallen below production costs, which a CISA official said is abnormal.

CISA said that declining prices have greatly affected the normal market order of the steel trade and has impaired the legitimate rights and interests of trade agencies and steel companies. If left uncontrolled, it could threaten its continued development and the development of other related industries.

The group agreed that there should still be room for steel prices to rebound, said Zhang Jianzhong, board chairman secretary of Tangshan Steel in Hebei Province.

Zhang added that he is optimistic about the effectiveness of their four proposals.

He said a stable steel market needs a process of relationship building between buyers and sellers. Abnormal price fluctuations are in many cases caused by hindered communication between the two.

(China.org.cn by Yuan Fang July 8, 2005)