The gap between China's steel imports and exports narrowed last year, but analysts say the nation will continue to be a net steel importer over the next few years.

China imported 29.3 million tons of steel products last year, down 7.87 million tons or 21.2 per cent year-on-year, according to statistics released yesterday by the China Iron and Steel Association.

This was the first year-on-year drop in China's steel product imports over the past six years, the association said.

In contrast, China's steel product exports leapt 104.6 per cent, or 6.06 million tons, to 14.23 million tons last year from 2003, according to statistics.

China also became a net steel billet exporter, exporting 6.06 million tons and importing 3.86 million tons of steel billets.

"The tumble in our steel imports and the sharp growth in exports mainly resulted from higher international steel prices than in the domestic market," Luo Bingsheng, vice-chairman of the association, told a press conference yesterday in Beijing.

Steel prices in the international market were some 30 per cent higher than the average price in the domestic market last year, Luo said.

"The changes in our steel imports and exports also signal that Chinese steel makers, especially big ones, are becoming increasingly internationally competitive," he said.

"We should set our eyes on both the domestic and international markets," he added.

However, senior officials at the association said earlier that China will remain a net steel importer in the years to come.

The nation's net steel imports totalled 13.83 million tons last year, down from 36.55 million tons in 2003.

Luo stressed China remained the world's biggest steel importer last year, despite the drop in imports.

"China's position as a major net steel importer will not be altered in the short term as its steel industry will continue to depend on the domestic market," said Zhou Xizeng, an analyst with CITIC Securities Co Ltd.

"Domestic steel demand will remain on a steady growth track in coming years as a result of the nation's booming industrialization," Zhou told China Daily.

Steel demand in China rose 13 per cent to 312 million tons last year over 2003, statistics showed.

The nation's output of steel products reached 297.23 million tons last year, an increase of 23.29 per cent.

Zhou said that the gap between China's steel imports and exports is much larger in terms of value than it is in terms of quantity.

High-value-added products, such as steel plates, accounted for 85.6 per cent of China's total steel imports last year, compared with 40.6 per cent of steel exports, according to statistics.

Luo said that overheating investment in the steel industry was cooled down last year thanks to the central government's macro-economic controls.

Fixed asset investment in the industry climbed 26.9 per cent year-on-year in 2004 to 178.08 billion yuan (US$21.51 billion). The growth rate dived by 65.5 percentage points year-on-year.

New steel-making capacity of more than 55 million tons was built in China last year.

Domestic steel makers reported record profits last year boosted by strong sales and high steel prices, Luo said.

Profits made by the association's 166 member companies surged 68.31 per cent year-on-year to 81.18 billion yuan (US$9.8 billion) last year on sales of 1 trillion yuan (US$121.4 billion).

(China Daily February 1, 2005)