China's steel sector is rolling on a sound track with overheated investment curbed and steel prices increasing at a "reasonable" pace, according to an industrial leader.

Luo Binsheng, vice-president of China Iron and Steel Association, said China's steel output will continue to grow in order to feed a booming economy and that the full-year steel's output may increase 16.9 per cent to 260 million tons.

Speaking to the India-China Ferrous Minerals Summit, which opened yesterday in Beijing, Luo also called for Chinese and Indian companies to sign more long-term contracts to secure India's iron ore supply to China.

Luo said that steel sector investment grew by 51.5 per cent year-on-year to 81.5 billion yuan (US$10 billion) in the first six months of this year.

The growth rate was down from a staggering 106.4 per cent during the first quarter of this year.

Statistics revealed that June's investment growth rate declined 16.4 per cent year-on-year.

"Investment growth rate is apparently slowed down," he said. "This means that the central government's cooling down measures have taken effect in reining in the investment spree."

And the steel price has rebounded to a "reasonable" level after it fluctuated in the past nine to 10 months, Luo said.

The price rose at a brisk pace from last October to a peak in March. Then it declined to its lowest in May as the government tightened bank loans and land approval.

The price rebounded in June and July, reflecting the actual demand-supply interaction, Luo said.

In addition, China's 66 major steel companies notched up combined sales of US$529.9 billion yuan (US$64.1 billion) and profit of US$42.64 billion yuan (US$5.2 billion) from January to July, up 57.66 per cent and 75.55 per cent respectively.

"In all," he said, "China's steel sector is rolling on a sound track, thanks to the macroeconomic controls."

As for steel trade, Luo said China imported 20.27 million tons of steel in the first seven months, down 8.3 per cent on a yearly basis. Exports jumped by 43.6 per cent to 5.92 million tons.

"Decrease of imports and increase of exports reflect the fact that the international steel price is higher than that on the Chinese market," he said.

China's steel output will continue to rise and might reach 260 million tons in 2004, as the nation's construction-led economy is in great need of raw materials, including steel and iron. That means the world's largest steel consumer will continue to import iron ore, said Luo.

"We are willing to import more iron ore from India," he said at the summit that gathered major steel makers, miners and traders from China and India.

"And we wish more long-term deals could be signed between Chinese and Indian companies, following a pattern that we have done with Brazilian and Australian iron ore providers," Luo said.

Currently, most of the transactions were conducted under spot purchases or short-term contracts of less than a year. A combination of factors including price and the lack of knowledge about each other had led to that situation, Luo said.

Fortunately, Indian miners and Chinese steel makers have shown great interest in forging long-term sell-buy partnerships.

"We are capable and ready to supply China in the future," said H. Abdul Wahab, president of the Federation of Indian Mineral Industries, adding a long-term partnership will be a win-win situation.

He said India is improving its port and railway capacities to facilitate delivery of iron ore to China.

China has become India's largest iron ore buyer since 2001. It imported approximately 30 million tons of Indian iron ore in the first seven months of the year, accounting for 26 per cent of its total imports.

(China Daily September 2, 2004)