CISA: More quality, less quantity needed

CISA: More quality, less quantity needed

Luo Bingsheng, vice chairman and secretary-general of China’s Iron and Steel Association (CISA), emphasized during a press conference yesterday (October 31) that China’s steel industry suffers from a paradox of oversupply and lack of structural supply. China’s oversupply is due to the coexistence of both advanced and outdated production capacity. The paradox stems from the fact that while there is an oversupply situation in the market, the advanced production capacity cannot meet the needs of domestic users. The outdated capacity, which is characterized by high energy consumption, severe pollution and outdated equipment, accounts for 30 percent of China’s total iron and steel capacity; yet, the demand for such products fails to reconcile itself with the supply. China’s outdated capacity could be categorized as 100 million metric tons of pig iron produced in 300-cubic-meter and smaller blast furnaces and about 80 million metric tons of crude steel produced in 30-metric-ton and smaller converters and electric arc furnaces. Thus, a key component of China’s restructuring and upgrading of its iron and steel industry is the elimination of its outdated production capacity. In terms of actual figures, through the first eight months of this year, China imported 17.5 million metric tons of finished steel products. Flat steel products accounted for nearly 87 percent (15.2 million metric tons) of all imports through August. The imported flat products were mostly of the high-value-added variety, i.e. cold rolled sheet/coil, color coated sheet/coil and electrical steel/coil. This shows that market needs cannot be met by domestic production alone. The output of long products such as wire rod and rebar in the first nine months of 2005 reached 137.8 million metric tons, up 22.7 million metric tons year on year. Low-end long products are the main culprit behind the oversupply situation in the Chinese market. Luo Bingsheng indicated that the excessive overall production capacity does not preclude further development in the country’s iron and steel industry. What is important is the realization of harmonious and sustainable development. There is room for the development of the iron and steel industry in the next few years, as China’s national economy and social development provide the iron and steel industry with increasing demand. Therefore, actively promoting restructuring, technological improvements, renovation and energy consumption will be key to ensuring that China’s iron and steel industry can meet the economic and social demand in terms of both quantity and quality. SteelOrbis Shanghai