China's rolled steel price, which kept sagging this year due to governmental macro-control policies, will probably rebound in the long run and stay at a high level, insiders said recently.

Although the rolled steel price may continue to drop in the latter half of this year, it cannot change the trend of price hike in a long period, said Chen Kexin, an expert with the Zhongshang logistics promotion center in his article published on the China Economic Herald.

Both the Chinese and world economy are growing robustly, which guarantee the huge demand of rolled steel in a long period, Chen said.

"In the first quarter of this year, China's gross domestic product (GDP) increased by 9.5 percent, with investment in fixed assets going up by 24.2 percent," Chen quoted official statistics as saying.

By 2010, the world's rolled steel consumption will reach 1.12 billion tons, he predicted.

Qi Xiangdong, deputy secretary-general of the China Iron and Steel Industry Association, predicted, at a recent national seminar on development of China's iron and steel industry, that China's rolled steel price will rebound in late June.

China's steel output has ranked first in the world for the past nine consecutive years, accounting for 14 percent of the world's total. Meanwhile, China's steel demand has risen 20 percent a year on average since 2000.

China's current rolled steel price, however, is too low to spur the production enthusiasm of steel companies. The steel price in eastern China dropped by 70 yuan (about US$8.46) per ton following the decision of the Ministry of Finance and the State Administration of Taxation to revoke the export tax rebate policy for billet starting on April 1.

With the 71.5 percent price hike for iron ore in the international market this year, China's steel industry's profits only increased 18.4 percent during the period, slumping 118 percentage points from the same period last year, according to figures from the National Bureau of Statistics. 

"The steel price will stay at a high position this year, and steel merchants need no panic," Qi said.

In the first four months of this year, China's major industries with huge steel consumption, which include sectors of machine tools, ships, power equipment and household appliances, grew over 15 percent, and the country's steel consumption exceeded 110 million tons, increasing more than 12 percent year on year, according to Chen's article.

The steel production cost, on the other hand, will also continue to rise due to the increases in the price of crude oil, coal, power as well as the iron ore, Chen said, suggesting that domestic steel mills optimize their production and export structure by focusing on steel products with high added value.

Since last year, the Chinese government has adopted a series of strict measures to curb the overheated development of its steel industry and prevent possible bubbles, including closing a large-scale steel project in coastal Jiangsu Province and reducing the export tax rebate rate for steel products.

A new policy relevant to China's steel industry has been drafted and will probably be promulgated by the end of this year, Li Shijun, another deputy secretary-general of the China Iron and Steel Industry Association said last Sunday.

The new policy, citing steel production as the industry with huge energy consumption, will probably raise the entrance level for steel production and discourage steel export, Li said.

(Xinhua News Agency June 10, 2005)