China’s output of crude steel may reach around 706Mt in 2011, far exceeding the prediction of 660Mt forecast at the beginning of the year, according to the China Iron and Steel Association (CISA).

The latest prediction was made on the basis of the crude steel output in the first half of this year when the country’s crude steel output reached 350Mt, up 9.6% from a year earlier.

China’s daily output of crude steel has stayed high since this year with the steel price going up amid robust demand from the construction sector.

China’s daily output of crude steel fell slightly to 1.9053Mt in the August 21-31 period, according to industry estimates released by CISA. The figure is 2.13% lower than the daily output in the August 11-20 period of 1.947Mt. Throughout August, daily crude steel output averaged 1.9351Mt, up 1. 16% from the previous month, said CISA.

The rising price for steel has improved the performance of steelmakers, which have been struggling in loss or meagre profit, although any profit remains very low.

China’s steel industry is in a dilemma of high production and low profit, noted by Zhu Jimin, president of the CISA. Meanwhile, the level of steel production is making difficulties in the country’s effort to phase out obsolete production capacities.

Earlier in July, the Ministry of Industry and Information Technology (MIIT) issued a document requiring 154 iron and steel companies nationwide to eliminate a combined outdated iron-making capacity of 31.22Mt within the year, much higher than the target of 26.53Mt set in May. The 154 companies include 96 companies with 31.22Mt of outdated iron making capacity in total and 58 companies with 27.94Mt of outdated steel making capacity.

Since it is the first year of the 12th Five-Year (2011-15) programme, local governments face less pressure to meet the target to eliminate, and thus have failed to push hard in phasing out outdated capacities. Apart from that, local governments also lacked sound supervision and monitoring in shutting outdated capacity as the iron and steel sector plays a major role in the regional GDP contribution and employment. With less than four months left of 2011, the industry, therefore, will be under high pressure to meet the annual elimination target before the year-end.

Source: China Metals e-mail