Reports from China suggest that despite a five-week upturn in steel prices, the nation's steel producers are still bear-ish about the industry's prospects for the coming year.
Ma Guoqiang, deputy managinf director of the Baosteel Group said that the slump affecting the auto, household appliance and shipbuilding sectors have forced his company to idle some furnaces and run below capacity in others. He said that the Baosteel has signed 100% of its purchase contracts for January production and at present 70% for February production although output this month may drop 20%. He added that "Some leading mills will launch their new capacities this year, which would further weigh on the already strained market; and 600m tons capacity can only be fully consumed by a GDP growth of some 12%."
Hebei Iron & Steel Group has revised up its steel production downwards by nearly 9 million tonnes to 41 million tonnes. Mr Liu Zheming, vice general-manager of the group said "The new investment in railway from central government has yet to come, and those from local authorities also have yet to take effect. This year will be more difficult for state-run mills than private ones."
Angang and Wugang, two state-owned companies, also have raised up production targets based on their brighter view towards the market demand in second quarter. What concerned most was the revival of medium and small-sized steel mills bolstered by the recently-announced economic rescue package, whose production resumption would push up the price of raw materials.
Wugang aims to expand its crude steel production by 6 million tonnes to 33 million tonnes in 2009. The steel mill is running its construction and railway steel lines at full rate at the moment but with some other lines still idle.
Angang expects to export 1.26 million tonnes of steel this year, down almost 50% from a year ago, while Hebei Iron & Steel Group also revised its export projections downwards.
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