A senior Chinese trade official said yesterday that the nation's rocketing steel exports are a result of the bullish international market, rather than favorable government policies.

 

"It is strong demand and high prices in the international steel market, not China's unequal trade measures, that are boosting steel exports," Wang Shouwen, director of the foreign trade department of the Ministry of Commerce, told a steel industry forum yesterday in Beijing.

 

The country's exports of finished steel products doubled year-on-year to 37.46 million tons in the first 11 months of 2006, according to data from the China Iron and Steel Association.

 

Full-year exports of steel products are forecast to reach 40 million tons, up 95 percent from 2005.

 

Wang's remarks were in response to growing overseas anti-dumping or anti-subsidy charges against Chinese steel products.

 

Eleven foreign nations have launched 27 anti-dumping or anti-subsidy investigations against steel products from China worth US$900 million since its entry to the World Trade Organization at the end of 2001, he said.

 

"China has never offered any subsidies to domestic steel makers to boost steel exports," he stressed.

 

On the contrary, the nation has taken a slew of measures to curb its overseas steel shipments.

 

In September, China cut its tax rebate for steel exports from 11 to 8 percent. This was followed in October by the imposition of a 10 percent tariff on overseas shipments of billets, pig iron and ferroalloy.

 

Despite these actions, the nation's steel exports have been surging this year thanks to strong international steel demand and international steel prices that are much higher than on the domestic market.

 

By the end of last month, the comprehensive price index in the international steel market stood at 153.4 points, compared with 105.12 in China, the world's biggest steel producer and consumer.

 

"Chinese steel mills should join forces to respond actively to possible anti-dumping charges in the future," Wang said.

 

He said China will beef up efforts to control exports of highly energy-consuming steel products next year according to "real conditions."

 

Luo Bingsheng, vice-chairman of the China Iron and Steel Association, predicted the nation's 2007 steel exports will decline sharply as a result of the government's measures.

 

He said exports of finished steel products will drop next year by 17.5 percent year-on-year to 33 million tons.

 

Liu Shuiyang, vice-president of Shougang Group, the No 5 steel mill on the Chinese mainland by production last year, said his company's steel exports will be affected next year by the government's curbs.

 

Liu said Shougang expects to sell 1.5 million tons of steel products abroad next year, down from the 2 million tons estimated this year. He said the biggest foreign destination for firm's steel products' is North America, with an annual export volume of 500,000 tons in recent years.

 

However, both Wang from the Ministry of Commerce and the steel association's Luo encouraged domestic steel companies to export more high value-added products to improve their international competitiveness.

 

Luo said China's crude steel production will reach 420 million tons this year, climbing 18 percent from 2005.

 

He predicted that 2007 production will grow 10 percent to 462 million tons.

 

China's imports of finished steel products will tumble 28.4 percent to 18.5 million tons this year, he said.

 

Imports will total 17.6 million tons next year, down 5 percent, he added.

 

He estimated demand for crude steel on the mainland will grow around 10 percent next year.

 

In the first 11 months of this year, the crude steel demand increased by 9 percent year-on-year to 351.6 million tons.

 

Iron ore prices

 

Chinese steel mills, led by industry leader Baoshan Iron & Steel Corp, have started formal talks with international iron ore providers on the 2007 prices of the major raw material to make steel.

 

Wang from the Ministry of Commerce said he expects international iron ore prices will remain at a "reasonable and stable level" next year.

 

"If prices fluctuate radically, it will harm both Chinese steel mills and international iron ore providers," he stressed.

 

"I hope they will find a mutually beneficial solution."

 

The world's three largest iron ore producers Companhia Vale do Rio Doce from Brazil, Australia's BHP Billiton and Anglo-Australian mining giant Rio Tinto reportedly want to elevate 2007 prices by 5 to 10 percent after two consecutive surges over the past two years.

 

In the first half of this year, the three, controlling 70 percent of global iron ore production, raised 2006 prices by 19 percent. Last year, prices jumped by a staggering 71.5 percent.

 

Wang said there has been a balance between iron ore demand and supply in the international iron ore market thanks to growing production of the material at home and abroad.

 

Iron ore production in China is predicted to surge by more than one-quarter to 644 million tons this year from 2005.

 

Meanwhile, the nation the world's biggest iron ore importer will purchase a total of 325 million tons of the material from other countries, up 18.2 percent.

 

(China Daily December 21, 2006)