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Expert Warns of Worsened Steel Oversupply

Oversupply of steel products has worsened in China's domestic market in the past two months, Wu Xichun, former president of the China Iron and Steel Association was quoted by the China Securities Journal as saying on Monday.

Wu made the remark when attending a high-level seminar on China's rolled steel market in Shanghai. This was not caused by insufficient demand, but by increase of net import and domestic supply, he said.

The steel price drop in international and domestic markets since April this year was natural, and the competitions and merger among domestic steel firms will decide the country's steel market performance in the latter part of this year, he was quoted as saying.

In July and August this year, China turned from a steel net exporter into a steel net importer, the newspaper reported.

In August China only exported 1.33 million tons of rolled steel, down 0.87 million tons from June. The worsening steel oversupply in July and August has led to price falls in August and September, Wu said.

The problem is not on the side of demand, he said. In the first eight months this year, China's urban fixed asset investment grew 27.4 percent, and in the first seven months, China's industrial added value increased 16.3 percent, according to the newspaper.

The growth rate of iron and steel output during the period, however, is much faster than that of demand. In the first eight months, China's pig iron output surged 31.87 percent, and rolled steel output, 26.22 percent.

If China's steel output decreases in the next few months, the steel market will be stabilized. Otherwise steel prices in the domestic market will continue to drop, Wu said. He urged for import reduction and output limitation in the steel sector.

(Xinhua News Agency September 27, 2005)

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