Zhou Ping of the State Economic and Trade Commission said: "The government is unlikely to have a finger in the pie because recent price hikes are a normal reflection of the steel market's development."

The price increases are mainly a result of faster growth in demand for steel since 2000 due to the rapid enlargement of steel-consuming industrial sectors and also to government controls on steel production that began in 1998, Zhou said.

Steel prices began to surge in the first quarter of last year, greatly worrying steel users and analysts.

Six subsidiary companies of the China State Shipbuilding Corp have submitted a joint letter to the State Development and Reform Commission, calling for the government to "take effective measures to make steel prices reasonable."

An executive of a shipbuilding company based in Guangzhou in South China's Guangdong Province, who refused to be named, said: "The price hikes have put great pressure on us and have weakened our competitiveness on the international market."

Chen Kexin, an analyst from the China Logistics Information Centre, also suggested that the government act swiftly to cool the hot steel prices.

"The soaring prices will trigger overheating investment in the steel industry and make the campaign against steel smuggling more difficult," Chen said.

Many Chinese steel companies are increasing their production capacity to cash in on the price hikes.

But Zhou told China Daily: "However, we needn't worry too much as prices will subside to normal levels with the release of excessive stocks of steel products hoarded by dealers."

Dealers' speculation on the market has fanned the flames of steel prices, said Zhou, who will move to the newly established State Development and Reform Commission.

"Domestic steel demand will continue on an upward trend this year thanks to the robust growth of other steel-consuming industries, such as the automobile and real-estate sectors," he said.

The State Economic and Trade Commission will be dissolved later this year in a new government restructuring. It has forecast that domestic steel demand will reach 215 million tons this year.

According to a commission plan, China's steel output will reach 190 million tons this year, up from 182 million tons last year.

Steel output increased by 18 percent year on year to 31.2 million tons during the first two months of this year, Zhou said.

China started to control steel production in 1998 to alleviate excess supply and increase prices on the domestic market.

Analysts said China's 180-day curb on steel imports last year also contributed to the price increase.

China imposed extra tariffs of 7 to 26 percent on imports of nine steel products from certain countries from May 22 last year.

The nation imported 24.5 million tons of steel last year.

Steel imports during the first two months of this year stood at 5.45 million tons, an increase of 95 per cent from a year earlier, according to Zhou.

(China Daily March 31, 2003)