Baosteel warns of lower output in China

Baosteel warns of lower output in China

The world's sixth largest steel maker, China's Baosteel, forecast a decrease in the output growth of China in the forthcoming years. Baosteel predicts that China's 23% year-on-year output growth in 2004 will regress to 10% in 2005. Based on the estimate, China would produce nearly 300 million metric tons of steel in 2005. Baosteel also suggests that Chinese output would grow 10% in 2006 as well. The Chinese steel giant explained that the price increase in iron ore will negatively impact the long-term healthy development of global steel industry, including the upstream and downstream industries of steel companies. Therefore, Baosteel said it plans to continue negotiations with each major supplier in order to arrive at a price that is acceptable for both parties. The company warned that the high increase in iron ore prices might damage the long term strategic and friendly relationship between steel and iron industries. Baosteel is currently waiting for the Brazilian government's approval to begin a 4 million metric ton capacity steel mill project in Brazil with iron ore producer CVRD. The plant is expected to be completed in 2010. However, whether CVRD's increase in iron ore prices will change the plans remains to be seen.