China may increase steel supplies 48% in 2006

China may increase steel supplies 48% in 2006

According to reports from China's Development and Research Center, China's oversupply in 2006 may become a headache for the rest of the world. Chinese State Council's Development and Research Center predicts in a report that China will see 116.51 million metric tons of surplus steel production in 2006 due to the slow down in demand, facing continous capacity increases. According to the report, China's total steel supplies will jump 48.03 percent to 453.36 million metric tons, while total demand will only increase 10.12 percent to 336.85 million metric tons. Meanwhile, the report expects iron ore production to increase 15.51 percent year on year to 448.66 million metric tons in 2006. The expected surplus is even more than Japan's overall steel production in 2005. Therefore, it is obvious that China will push competition in international markets. The increase in China's exports, facing a decrease in imports may become a serious isssue for global steel markets in 2006. Meanwhile on the raw material side, the report's claim “demand growth for iron ore will slow and imports will not increase sharply, and there should be no problems regarding iron ore supply," may not come true because the quality of Chinese iron ore is relatively low and the iron ore capacity increase is not in line with the steelmaking capacity.