20 northern steelmakers plan to reduce raw material costs
SteelOrbis Shanghai
On December 22 and 23, twenty iron and steel companies in northern
China, including major mills such as Shougang,
Angang, Benxi Steel, Tangshan Steel,
Baotou Steel and Handan Steel held a seminar at Handan Steel's premises regarding next year's new policy and measures on raw material purchasing issues.
Participants think that with the further release of iron and steel
production capacity, finished steel prices is unlikely to see sharp price hike. What's more, the iron and steel companies suffered huge cost pressures due to the high raw material prices. Therefore, cutting the purchasing cost of raw material is crucial under current market situation. The mills will try to reduce purchasing cost in 2006 and even in the next few years.
The meeting saw Beijing, southern part of Hebei Province, Tangshan, Shandong,
Baotou and northeastern
China as the major raw material purchasing markets. In addition, a standing committee of raw material association in northern
China was established and Shougang, Handan Steel, Tangshan Steel, Jinan Steel,
Baotou Steel and Lingyuan Steel were elected as team leaders.
Next two years will be a hard time for Chinese iron and steel industry. The Chinese iron and steel companies will have to reduce their prices to obtain more market shares, and have to compete with each other in domestic and overseas raw material markets to ensure their
production, which will in turn increase the total cost of iron and steel industry.
In our opinion, the movement of these twenty steelmakers to control the raw material prices will have some influence in the short term, but will not last long. It is learnt that
production capacity of domestic mines will be reduced next year. the Chinese government will increase the charges in order to prevent mining disasters and to protect the environment. Therefore, the cost of raw material will go up.
In summary, the twenty steelmakers are unlikely to achieve their goals.