BEIJING - After 25
years of breakneck growth, China's massive steel
industry is on the brink of achieving Mao Zedong's
dream from the "Great Leap Forward" period: China
could become the world's top steel producer, by
quantity, for 2005, if December production holds
to the trend for January-November.
The
torrent of cheap Chinese steel is becoming an
increasingly dire threat to South Korea, which is
a major producer and exporter; Korea's steel
imports from China may exceed its
exports for the first time in
2005, and ROK steel giant POSCO is already
slashing domestic prices in a bid to defend its
home turf.
According to Chinese news
services, China's crude steel production reached
318 million tons in the first 11 months of 2005,
up 25.5% year-on-year, and the figure for the
whole year is likely to exceed 340 million tons -
which would see China surpass Japan as the world's
leading crude producer, according to statistics
released by the China Iron & Steel Industrial
Association.
In addition, pig iron output
registered 298.51 million tons in the first 11
months, up 29.4% year-on-year; and rolled steel
production increased to 335.25 million tons,
surging 24.6% year-on-year. By 2010, the country's
annual steel production is expected to top 400
million tons, according to Shan Shanghua, head of
the China Metallurgical Industry Planning &
Research Institute.
Korean trade with
China in deficit Meanwhile, South Korean
imports of steel from China are expected to exceed
exports to the fast-growing economy this year for
the first time, a trade organization said on
December 18.
In the first 10 months of the
year, South Korean steel imports from China soared
79.1% from a year ago to 5.76 million tons,
according to the Korea Iron & Steel
Association. In contrast, exports of South Korean
steel products to China fell an annual 5.2% to
3.97 million tons during the January-October
period.
Given the trend, South Korean
imports of steel from China are likely to surpass
its shipments to the country for all of 2005,
recording a trade deficit for the first time, the
association said. In 2004, South Korean steel
exports to China stood at 4.97 million tons,
slightly more than 4.33 million tons of steel
products imported from the country.
"Imports of cheap Chinese steel products
have been rising at a fast [clip] this year amid
sluggish shipments of domestic products," an
association official said. There is a high
possibility that South Korea will post a trade
deficit with China in the steel sector next year,
as China's steel production is expected to rise
considerably given that the modest increase in
domestic demand is not expected to absorb the
increased production, he added.
POSCO
eyeing price cuts South Korean steel maker
POSCO said on December 20 it would cut domestic
prices for its steel products next year to fend
off the surge from China. Starting next year, the
domestic price of POSCO's steel products will be
lowered by as much as 17%, the company said. POSCO
sells about 75% of its output at home.
POSCO will lower the price of high-end
hot-rolled steel coil, used in auto manufacturing,
to 500,000 won (US$492) a ton, from the current
550,000 won, the company said. Prices per ton will
be lowered to 480,000 won from 550,000 won for
ordinary hot-rolled coil and 450,000 won from
535,000 won for "minimill" hot-rolled coil, POSCO
said.
As for cold-rolled coil, prices per
ton will be cut to 600,000 won for high-end
products and to 580,000 won for ordinary products,
the company said. The price cut is a result of
POSCO's strategy to defend the domestic market
from the "indiscriminate exports of Chinese steel
makers", the company said.
In a recent
meeting with affiliate companies, POSCO's chief
executive, Lee Koo-taek, warned that the company
may experience "unprecedented hardship" next year
as a result of overproduction by Chinese rivals.
Globally, prices for hot-rolled wide coil steel
have been falling in recent months, after a
historic peak in the spring of 2005.
