China's steel production expected to increase despite rising material costs
MarketWatch reported that “Analysts expect steel production [in China] to increase next year as some industry capacity that had been ordered by Beijing to temporarily close down to meet the country’s emission targets by the end of 2010 come back on stream.” These steel mills are bringing capacity back on line as they expect stronger demand in the second quarter of 2011 and future projects.
The article says “In September this year, Beijing reportedly asked several steelmakers to temporarily suspend production to help meet the country’s targeted reduction for energy consumption and carbon output during the 11th Five Year Plan, ending in 2010.”
Reuters show “China’s steel output is forecast to rise to a record 663 million tons this year, requiring record iron ore imports of 670 million tons into the country to produce the metal.”>“The continued growth in steel production will be positive for steelmaking inputs such as iron ore and coking coal. Prices of these commodities have been firm in [the fourth quarter] and we expect further strength into 2011,” Sim said. “The higher raw material prices will likely erode margins at steelmakers, which face limited pricing power amid increased supply.”
Baosteel Group said it will raise prices of hot-rolled, cold-rolled and stainless steel products for January. Merrill Lynch “expects iron ore contract prices are expected to rise 7.6% in the first quarter, “offsetting nearly half of Baosteel price hike.”
At the same time, prices of another key raw material — coking coal — are expected to rise further next year on when China loosens its power rationing policy.”