China to supply steel for the rest of Asia

China to supply steel for the rest of Asia

China's steel exports are increasing day by day with the increasing capacity and low prices. According to recent news, South Korea's steel imports increased 6.4 percent year on year and reached a new peak in 2005 due to abundant cheap steel imports from China. Meanwhile, South Korea's largest steelmaker Pohang Steel Company (POSCO) decided to restructure its management in order to improve its decision making process due to the challenge by China's cheap products. Furthermore, the world's number one shipbuilder South Korean Hyundai Heavy Industries said they would increase the steel plate imports from China to 500,000 tons in 2006 from the 200,000 tons in 2005. Japanese steelmakers will even have to reduce their plate prices for exports to South Korea. Meanwhile, Indian Steel Minister Ram Vilas Paswan said that the government would announce a new steel policy in order to regulate prices. This policy is required to increase steel production in the country because Indian steelmakers have troubles in competing with imports from China. Even Australian steelmaker BlueScope has reduced its profit forecast due to abundant steel production in China. On the other hand, China's State Development and Reform Commission said that steel prices in China would drop further in 2006 due to over production. The Commission also predicts that China's steel output will rise around 10-15 percent to more than 400 million metric tons. Although forecasting a decrease in prices would be a bit presumptuous, it is right to say that beating the steelmakers in China in terms of price competition is difficult. Moreover, these steelmakers are now rapidly developing their production lines and production quality. If you cannot beat your enemy then you merge with it. For that reason, many global steelmakers are thinking of acquiring stakes in Chinese steel mills. Mittal, having acquired 36.7 percent stake in China's Hunan province based Valin Steel last year is now considering to buy a stake in the Inner Mongolia based Baotou Steel. Arcelor has also, reportedly, reached a final agreement to buy some stake in China's largest H-beam maker Laiwu Steel. Briefly, the roles will change completely in 2006. China will become a steel supplier for the other countries in Asia and become integrated more into rest of the world in terms of steel production while South Korea and India will emerge as major steel importers thanks to major investments in South Korea's automobile, shipbuilding and machinery industries and infrastructure investments in India.