China's steel output this year is expected to reach 265 million tons, up 16.9 percent from last year's total, according to Qi Xiangdong, vice secretary-general of the China Iron and Steel Association (CISA).

At a steel market symposium held in Shanghai on November 13, Qi also said that output of rolled steel should climb 14.8 percent to 277 million tons and steel consumption is likely to rise 13.0 percent to 280 million tons.

Despite the increases, Qi believes that macro-economic controls on the steel sector had achieved initial progress, with excessive investment curbed, fixed-asset investment slowing every month and the investment structure improved.

Investment by state-owned enterprises or state holding companies accounts for 60 percent of the total. Steel companies raised 80 percent of investment funds themselves.

The structure of production has also been adjusted, reported Qi. Growth in output of high-value-added steel slab is 7.6 percent higher than that of steel products for construction.

Qi stated that the rise in output and higher market prices are the results of strong demand and production cost changes. While controls have reined in unhealthy factors in the sector, they have not shaken the basis of steel demand.

As the overall economy continues to develop rapidly, steel demand is expected to remain on an upward trend.

Since international steel prices are higher than in the domestic market, China's steel imports have been decreasing while exports are on the rise.

Driven by strong domestic demand, China's steel production began to rebound in July. Steel prices, after fluctuating wildly in May, have stabilized on a higher plateau.

The CSIA is optimistic about profitability in the industry. Ninety key metallurgical companies reported combined profit of 99.3 billion yuan (US$12.0 billion) in the first three quarters, up 44.6 percent from the same period last year and the highest figure in recent years.

Domestic steel consumption in 2005 is likely to continue rising despite a slowdown in overall economic growth, and profitability should remain strong, according to Qi.

(China.org.cn by Tang Fuchun November 22, 2004)