China's steel
production is expected to fall during the last five months of the year due to a decrease in market demand and additional closures of outdated industrial plants.
China produced 194 million tons of steel through the first seven months of the year, a 28.06 percent year on year increase. This equates to a monthly average of nearly 27.7 million tons through July. However, average monthly
production for the remaining five months of 2005 is expected to fall to 27.2 million tons. Even with this predicted slow down,
China is still on pace to reach 330 million tons of output by the end of the year.
Chinese steel makers began cutting back their
production in June due the decrease in the market activity. Following Beijing's introduction of macroeconomic controls for the steel industry, buyers adopted a wait and see attitude and stopped purchasing steel for stocking purposes. The latest trend in the industry is towards spot purchases for immediate needs.
Meanwhile, the closing down of out-dated industrial plants will also factor into the decrease in steel
production during the latter part of this year. For example, Tangshan municipal government in Hebei province recently used pollution ordinances to shut down illegal steel manufacturers. Tangshan plans to phase out blast furnaces with volumes less than 200 cubic meters and electric arc furnaces and converters with volumes less than 20 tons by the end of 2005.