Steel Export in Liaoning Continued to Decline for Four Months since July
According to Shenyang Customs, steel export volume in Liaoning Province has continued to decline for straight four months since July, with reduction in both export volume and value were 25.3% and 30.1% respectively, in particular for galvanized sheets and coils.
Domestic steel prices have substantially fallen since the end of this September as a result of fast increase in output and weak domestic demand. Behind the factors in the decline of exports rested with continued sluggish in Europe and North America, squeezing in profits as well as reducing in export tax credit in the country.

Iron Ore Price Expected to Fall in 2006: Ministry
The Ministry of Commerce (MOFCOM) has forecast that the price of iron ore can be expected to follow a downward trend in 2006 after this year's drastic rise.
Quoted by the Economic Daily on December 6, an unnamed official from the ministry's Foreign Trade Department said tight supply and demand in the global iron ore market would come to an end next year, and with ample supplies prices will fall accordingly.
In the next few years, the official said the world's major suppliers would increase investment in exploiting iron ore by over US$5 billion.
Zou Jian, chairman of the Metallurgical Mines Association of China, made a bolder estimate of up to US$10 billion, Xinhua News Agency reported on December 6.
He said large suppliers in Brazil, Australia, the UK and India will continue to invest heavily to increase their output.
According to Zou: Brazil's CVRD plans to increase investment by US$2.5 billion to raise annual output from 200 million to 300 million tons by 2008; Australia's BHP Billiton plans to inject US$1.4 billion into exploitation to increase annual output by 70 percent in four years; the UK's RioTinto plans to increase investment in Australian mining areas by US$1.4 billion before 2008; and India's mining department will do their best to increase equipment and raise annual output from 120 million to 160-180 million tons.
Xinhua quoted RioTinto CEO Leigh Clifford as telling China Business News that they would not only increase investment in mining but also in equipment in areas such as transportation.
The commerce ministry said the increase in supplies from both these companies and new iron ore exporting countries will increase 2006's oceangoing trade volume by 62 million tons from that in 2005, while the increase in demand will not exceed 50 million tons.
China's investment in the iron ore industry has grown markedly: in January to August, fixed asset investment totaled 14.659 billion yuan (US$1.81 billion), a year-on-year increase of 98.7 percent, and investment is expected to top 24 billion yuan (US$2.97 billion) by the end of the year.
Zou said that, despite this, global iron ore resources are still largely controlled by BHP Billiton, CVRD and RioTinto, which will increase difficulties in price negotiations.
The ministry official said that in 2006 the world steel market would be stable, but that major European and US steel companies will limit steel output to maintain prices, so demand for iron ore will not increase greatly.
The official forecast that China's iron ore imports would increase 35 million tons next year, a sharp fall from this year's growth rate.
In the first 10 months of 2005 China imported 220 million tons of iron ore worth US$14.85 billion, year-on-year increases of 32.2 and 44 percent respectively. The growth rates were 6 and 135 percentage points lower than those in the same period of 2004.
The official attributed the decrease in imports to the government's macroeconomic control policy, which has resulted in an oversupply of steel due to increasing supply and weakening domestic demand.
The official also said that if the price of iron ore continues to rise, the government may take part in the price negotiations.
The ministry said it would closely monitor iron ore imports, give timely analysis of price trends and provide information for domestic companies.
It added that it would also intensify coordination and supervision of imports, rectify and regulate them to ensure stable supply and impel the price of iron ore to drop to a reasonable level.
Qi Xiangdong, deputy secretary of China Iron and Steel Association (CISA), was quoted by Xinhua as predicting that the global iron ore market would not undergo big fluctuations next year, but was not stable yet.

Iron ore imports estimated to rise by 35 mln tons in 2006
An official with the Ministry of Commerce has forecast that China's iron ore imports would increase by 35 million tons in 2006.
The increase will be a sharp fa ll from this year's growth rate,he said.
The source attributed the import decrease to China's current macro control policy, which has resulted in an oversupply of steel due to the country's increasing supply and weakening domestic demand.
Statistics from customs showed that in the first 10 months this year, China imported 220 million tons of iron ore and the import volume stood at 14.85 billion US dollars, an increase of 32.2 percent and 44 percent, respectively, from the same period of last year.
The growth rates were 6 percentage points and 135 percentage points lower than those in the corresponding period of 2004.
It is estimated China will import 264 million tons of iron ore this year, which accounts for 41.6 percent of the global iron ore trade.
China paid a big price for importing iron ore this year due to rocketing prices.

China regroups regional steel makers

A number of regional steel makers in China are regrouping themselves in a bid to improve their market competitiveness, China Securities Journal reported.
The regrouping began in the second half of this year when Tonghua Steel and Iron Group Co., the biggest State-owned firm in northeast China's Jilin Province, Jilin Ferroalloy Co. and the private Jianlong Steel and Iron Co. merged into a single entity named New Tonggang steel Group on November 28.
With a registered capital of 4.2 billion yuan (519.8 million USdollars), the new group plans to increase its capacity of steel making to 10 million tons and ferroalloy to 2 million tons in the coming few years, according to the report.
Two steel makers in northeast China's Liaoning Province, Anshan Steel and Iron Company and Benxi Steel and Iron Co., joined hands in August to set up Anben Steel Group Co, whose annual steel-making capacity totals 20 million tons and will be raised to 30 million tons by 2010.
In north China's Hebei Province, three local steel makers, including Tangshan-based steel plant, were incorporated into New Tanggang Steel Co, whose combined steel output last year totaled 13.12 million tons.
Luo Bingsheng, executive deputy president of the China Iron andSteel Association, said China encourages local steel makers to getbigger and stronger through incorporation.
Major steel makers in China are controlled by central and provincial governments, but overseas investors are beginning to invest in medium- and small-sized steel plants.
Mittal Steel Company, the world's No.1 steel maker, announced earlier this year that it has completed the acquisition of 36.67 percent of China's Hunan Valin Steel Tube and Wire.
Mittal Steel paid 338 million dollars for the stake in one of China's leading steelmakers.
China, the world's No. 1 steel maker and consumer, will limit its annual steel output to the maximum of 450 million tons during the next five years, sources with the China Iron and Steel Association said.
Currently, China's steel output capacity stands at 500 million tons, far exceeding the domestic demand.

Iron ore imports estimated to rise by 35 mln tons in 2006

An official with the Ministry of Commerce has forecast that China's iron ore imports would increase by 35 million tons in 2006.
The increase will be a sharp fa ll from this year's growth rate,he said.
The source attributed the import decrease to China's current macro control policy, which has resulted in an oversupply of steel due to the country's increasing supply and weakening domestic demand.
Statistics from customs showed that in the first 10 months this year, China imported 220 million tons of iron ore and the import volume stood at 14.85 billion US dollars, an increase of 32.2 percent and 44 percent, respectively, from the same period of last year.
The growth rates were 6 percentage points and 135 percentage points lower than those in the corresponding period of 2004.
It is estimated China will import 264 million tons of iron ore this year, which accounts for 41.6 percent of the global iron ore trade.
China paid a big price for importing iron ore this year due to rocketing prices.

China to close 4,000 small coal mines annually

China will shut down 4,000 small coal mines annually in the forthcoming three years, said Zhao Tiechui, head of the State Administration of Coal Mine Safety Supervision on Saturday.
Zhao made the remark at an on-the-spot meeting specially convened at Dongfeng Coal Mine, run by the Qitaihe branch of the Longmei Mining (Group) Co. Ltd. in Heilongjiang, where a major coal mine explosion took place on Nov. 27, killing 169 miners so far.
"We can at most keep 10,000 or so small coal mines," said Zhao,who also promised to drastically reduce the incidence of major accidents with coal mines in two years.
China now has 24,000 small coal mines with the annual production output ranging from 10,000 tons to 30,000 tons, which account for 70 percent of the country's number of coal mining ventures.
The small coal mines have not only caused grave resource waste, with a low rate of recovery, which is averaged between 10 percent to 15 percent, but also serious pollution and higher incidence ofaccidents major, posing a long-standing problem endangering safety at coal mines in the country, according to Zhao.
Those to be closed will include privately owned coal mines and state owned coal pits, and the methods such as restructuring and mergers will be adopted in the process of closure, said Zhao.
"Closing of small coal mines won't affect the country's demand for coal," said Zhao, adding the country had approved establishment of 13 large coal production bases each capable of turning out over 100 million tons of coal annually.

China to see huge steel surplus in 2006
China is expected to produce far more steel than it needs in 2006, resulting in a surplus of 116.5 million tonnes that will exert downward pressure on the country's steel prices, a government think-tank said on Wednesday.
The State Council Development Research Centre, the cabinet's think-tank, said output of iron ore -- a key raw material for steel -- would rise 15.5 percent to 448.7 million tonnes next year, thus easing supply concerns.
The think-tank said steel supply, including production and imports, in China would rise 48 percent to 453.4 million tonnes in 2006, while it saw demand at only 336.9 million tonnes.
China is the world's largest maker and consumer of steel.
"The overcapacity problem in China's steel industry cannot be solved next year, and that will further depress steel prices," it said in a report published in the official China Securities Journal.
The forecast steel surplus would be more than twice that of the think-tank's 2005 expectations of 43 million tonnes, as a slowing property sector slashes demand growth for the metal.
That has caused the country's steel prices to dive an average of more than 30 percent since peaking at a decade's high around the end of March, hitting steel mills such as Baoshan Iron and Steel Co. Ltd.
Baosteel, China's biggest and the world's number-six steel maker by volume, said earlier in November it would cut product prices by an average of more than 10 percent in the first quarter of 2006 versus the fourth quarter of 2005.
China became a net steel exporter in the first 10 months of this year, selling 23.29 million tonnes of steel and steel products abroad, compared with imports of 23.06 million tonnes, official figures showed.
The country is expected to become a net steel exporter on an annual basis for the first time in 2005, fanning fears of a flood of cheap steel on global markets.
"As for raw materials, demand growth for iron ore will slow and imports will not increase sharply," the think-tank said. "There should be no problems regarding iron ore supply."
Asian producers, including Nippon Steel Corp. and POSCO , are calling for iron ore price cuts from suppliers Rio Tinto Ltd/Plc. , Companhia Vale do Rio Doce and BHP Billiton Ltd/Plc. , which are seeking a small rise on top of last year's 71.5 percent surge. Enditem

China's increasing energy demand poses no threat to world market: official
A Chinese official in charge of energy said Tuesday that China has eased its pressure on the energy supply, and the country's surging demand for energy poses no threat to the world energy market.
"China's astonishing energy demand has been greatly reduced this year," said Wu Guihui, deputy director of the energy bureau of the National Development and Reform Commission at the 2005 China Gas Summit held here from Monday to Tuesday.
Wu said that during the first nine months of 2005, China produced 1.43 billion tons of coal, up 8.25 percent year on year.
During the same period, China's electricity generation volume grew 13.4 percent to 1.78 trillion kilowatts, while the production of crude oil reached 136 million tons, up 4.2 percent and hitting a record high, Wu said.
According to the official, China imported 93.96 million tons of crude oil in the first nine months, increasing four percent from a year earlier with the growth rate dropping by 30.4 percentage points.
The import volume of oil products during the same period reached 23.24 million tons, declining 16.4 percent year on year, with the growth rate dropping by 45 percentage points, he said.
China's surging demand for energy has had little impact on the world energy market and poses no threat in this respect, he said.
Wu emphasized that China will satisfy its energy demand mainly with its domestic resources.
China is not only a large consumer of energy, but also a big producer. About 90 percent of its energy demand has been met with its domestic resources, Wu said.
Furthermore, China has great potential in energy supply. China abounds in coal reserves and two thirds of the country's hydroelectricity resources are yet to be explored, the official said, adding that the country is still launching large-scale development in the nuclear, wind and bio-power sectors.
The Chinese government has taken a series of measures to reduce its energy demand, including restricting high-energy consumption industries, increasing energy efficiency and accelerating the country's transformation of the economic growth mode.
China's energy consumption in producing every 10,000 yuan (1234.57 US dollars) of GDP in 2004 decreased 45 percent as compared with that in 1990.
China plans to save energy resources at an annual rate 3 percent by2020, equivalent to 1.4 billion tons of standard coal, the official said.

Undersupply of coal to ease in 2006
The coal supply, especially that for power plants, is expected to ease in 2006, according to the China Coal Industry Association.
Total coal production in China is expected to grow 8 percent over last year to more than 2.1 billion tons in 2005. In the meantime, demand of coal for power generation will increase 120 million tons to 1.12 billion tons, the association estimated.
"After the macro-control policy was implemented, undersupply of coal for power plants in the past two years has been easing gradually since the beginning of this year," said an expert from the association.
During the January-September period, the supply of coal for power plants increased 18.1 percent year on year to 367 million tons, resulting in a historical high coal stock in September and October in the past several years.
Power plants' coal stock exceeded 28 million tons in September and October, which can last for 19 days and is a sharp increase over the same period last year, according to the expert.
However, sources with China Electricity Council pointed out that there are still worries in the electric coal market even with less-tightened supply.
As winter comes, the sources noted, coal demand will augment for heat supply and enhanced electricity demand, and less rainfall will reduce hydropower supply. Unfavorable weather in winter will also affect coal transportation through railways and highways.
Besides, debased coal quality has become a factor for the unstable market of coal supply, according to the sources.

China's car production rises 67 percent in October
China produced 245,400 cars in October this year, up 67.6 percent year-on-year, said the National Statistics Bureau Thursday.
In the first ten months of this year, altogether 2,358,800 cars came off the assembly line, up 21.5 percent over the same period of last year.
Car production dropped nearly 10 percent to 24,800 cars, as compared with the figure in September, the source said.
The output reduction resulted from the sales slump this October and a stockpile pressure since the third quarter this year, the source added.
Major automakers, such as Xiali and Beijing Hyundai, chopped their car production by around 30 percent, it said.
The National Statistics Bureau noted that seasonal adjustment was a reasonable cause for the cut in auto production, which predicts a rebound of car output in November.

Hebei Steel Companies to Consolidate
Hebei, China's biggest steel making province, is planning an aggressive reshuffle within its fragmented steel sector.
The north China province intends to combine its 202 steel mills into 40 groups through mergers over the next five years, according to sources from the Metallurgical Industry Association of Hebei Province.
Following the reshuffle, the top 10 steel makers are expected to control more than 75 percent of the province's annual output by 2010, up from around 60 percent last year, according to the sources.
Hebei has been the number one steel-making province in China since 2001 and now controls one-fifth of the nation's total production. Sources said the province would produce more than 70 million tons of steel this year, up from 57 million tons last year.
However, most steel makers in Hebei are small; the province's biggest steel company, Tangshan Iron and Steel Corp, only produced 7.66 million tons of steel last year, ranking number six in China. The nation's top steel group, Shanghai Baoshan Iron and Steel Corp, produced 21 million tons in 2004.
Two big conglomerates in Hebei will be created around government-owned Tangshan steel firm in the north and Handan Iron and Steel Corp, the province's number two steel maker, in the south, sources said. Handan Iron and Steel, also controlled by the provincial government, produced 6.8 million tons of steel last year.
The province will speed up consolidation between local privately-owned steel makers, which control more than half of all production, sources said.
Steel companies in Hebei have also started teaming up with counterparts outside the province, as well as overseas investors.
Last month, Tangshan Iron and Steel and the Shougang Group, China's number four steel maker based in Beijing, formed a joint venture to build an 800-ton steel plant on a tiny island in the Bohai Sea. This has an initial investment of 67 billion yuan (US$8.27 billion).
The Tangshan steel firm and Shougang hold a 49 and 51 per cent stake in the venture respectively.
Meanwhile, CITIC Pacific Limited, a Hong Kong-based-and-listed industrial investment group, yesterday announced it would spend 1.48 billion yuan (US$182.7 million) buying a 65 percent stake in Shijiazhuang Iron and Steel Corp, the eighth biggest steel producer in Hebei.
The remaining stake will be held by the provincial government and a local industrial investment firm.
The Shijiazhuang steel firm produced 2.08 million tons of steel and reported 282 million yuan (US$34.8 million) in after-tax profits last year.
The reshuffle of Hebei's steel sector is in line with the central government's efforts to boost consolidation within China's entire steel industry.
According to China's steel industry policy, published in July, the nation plans to create two steel giants, each with annual output exceeding 30 million tons, by 2010 through mergers and acquisitions (M&A) between domestic steel makers.
China, which has been the world's biggest steel maker for 10 years, expects its 10 biggest steel groups will account for more than half of the nation's total steel production by 2010 and over 70 per cent by 2020.
However, there are lots of obstacles facing this rationalization process, according to analysts.
Zhou Xizeng, of Beijing-based CITIC Securities Co Ltd, told China Daily that it would be very difficult to balance the interests of different local governments as many steel makers form the backbone of local economies.
"Lots of steel makers enjoy good sales and profits as China's steel demand is on an upward trend. Therefore, who will be willing to be controlled by someone else?" Zhou said.
Steel sector profits in Hebei surged by 82.8 percent year-on-year to 12.2 billion yuan (US$1.51 billion) in the first eight months of this year, according to local statistics.
In the first three quarters of this year, China's top 68 steel makers made 65.3 billion yuan (US$8.1 billion), up 11.7 percent from a year ago, according to statistics from the China Iron and Steel Association.
China's steel output is anticipated to reach 340 million tons this year, up from 273 million tons last year.

Top coal producer plans to lift price
China's largest coal producer, the Shenhua Energy Co. Ltd, which is listed in Hong Kong, may lift its coal price next year, the China Securities Journal said in a report on Friday, citing Shenhua Chairman Chen Biting.
Chen predicted the coal price will rise in the fourth quarter as winter comes and inland provinces begin to stockpile coals. He expected a high price level next year.
At present, the contractual price of the coal supplied by Shenhua is some 20 yuan (about 2.5 US dollars) per ton lower than that supplied by other coal producers in the country.
So, Shenhua will consider raising the price next year in line with the circumstances then, Chen said.
Besides, Shenhua's performance will be boosted steadily next year as the Chinese government is closing small coalmines to improve coalmine safety, he added.
He also said that the slight coal price fall in the past two months would not have much unfavorable influence on Shenhua's performance this year, as 85 percent of its coal sale is realized through long-term contracts.
Chen also disclosed that the company is preparing for acquisitions in and outside China. Shenhua turned out 101.3 million tons of coal in 2004, accounting for over 5 percent of China's total. Its verified coal reserve amounted to 5.9 billion tons by the end of 2004.
The group aims to produce 200 million tons of coal and becomes the world's largest coal supplier and coal clean transformation base by 2010, said Zhang Yuzhuo, Shenhua's vice general manager while addressing the Euro-Asia Economic Forum held in Xi'an, capital of northwest China's Shaanxi Province.

China's economic efficiency indicators: smelting and pressing of ferrous metals
China's economic efficiency indicators of the sector of smelting and pressing of ferrous metals in the first eight months of 2005, with the value in one billion yuan:
Items Value Growth Rate (%)
Cost of management 43.31 10.4
Received debts 76.48 22.8
Inventory of manufactured products 94.10 40.3
Value added tax payable 51.17 28.2
Average employment 2.78 million 4.8
The industrial statistics include all state-owned enterprises and the non-state-owned ones with annual sales income over 5 million yuan.
Source: the National Bureau of Statistics

Tianjin Steel Pipe Group Became China’s Largest Production Site for OCTG
Tianjin Steel Pipe Group has become China’s No.1 production site for OCTG, accounting for 50% domestic market share. Successful bidding for a pipe project in Belarus this year suggested the group’s technology has advanced into the international market in addition to leading its way in the household market.
At present, import ratio of OCTG stands less than 20% and that of homemade materials up to 80% plus. Each of two pieces of OCTG is produced by Tianjin Pipe in the country.

Minmetals considers further overseas investment in resources
State-owned trading giant China Minmetals has not ruled out further overseas investments despite its failure to acquire Noranda in 2004, a senior official said on Wednesday.
“In the future, we will strengthen our resource strategy,” which includes looking at mining investments outside China, senior vp Zhang Yuanrong said at the China Mining 2005 conference.
Zhang declined to be more specific about those regions or products in which Minmetals might invest.
Minmetals is China’s largest metals trader and importer, accounting for 35 percent of China’s alumina imports and 40 percent of its copper concentrate imports in 2004.
The company’s overseas interests include a 51-percent stake in the Sherwin Alumina plant in the USA, a long-term copper supply alliance with Chilean copper giant Codelco and an option to acquire a 25-percent interest in the 150,000 tpy Gaby project in Chile.
Beijing has encouraged China’s resource companies to secure international supplies of much-needed commodities in what it calls a “stepping-out” policy.
But Chinese companies have failed in several high-profile attempts to buy Western resource companies, such as Minmetals’ bid for Noranda and China National Offshore Oil Corp’s attempted takeover of US oil producer Unocal.
Chinese companies need to grow and be more selective in acquisitions if they are to compete abroad effectively, CIBC World Markets md for Asia Pacific, Warren Gilman, told the conference.
More targeted deals stand a better chance of success than major company takeovers, he said, citing China Metallurgical Construction Corp’s development of the Ramu nickel-cobalt project in Papua New Guinea, the Jinchuan and Baosteel joint venture to redevelop the Philnico Nickel Refinery in the southern Philippines, and Jilin Ji’en Nickel’s joint venture in the Philippine island of Mondoro.
But Western mining companies, such as BHP Billiton, Rio Tinto, Xstrata and Inco, have advantages over their Chinese counterparts, including larger market capitalisation, higher earnings ratios and the ability to make savings when acquiring companies in their own region, he said.

Coal, power, oil shortage to ease: official
The shortage of coal, power, oil and transport supply will be further alleviated next year, said an official with the National Development and Reform Commission (NDRC) here Monday at a conference on the prospect of China's industry in 2006.
Since this year, the shortage of coal, electricity, oil and transport has been eased to some extent, but some new problems such as oversupply also appeared, said Ma Liqiang, deputy secretary-general of the NDRC.
Due to oversupply, China's steel price has been dropping since April, and the stockpile of coal, coke, non-ferrous metals, household appliances and cars has increased.
In the first nine months this year, the deficit of enterprises that lost money jumped 57.6 percent year on year, and the new deficit enterprises are mostly in the electronics, petrochemicals, power and metallurgy industries.
The energy shortage problem, however, is still serious, and in certain regions, certain seasons and certain periods of time, the power shortage is still severe, said Ma.
In 2006, the oversupply problem in the industrial sectors will continue, and it will be difficult for the manufacturing industry to maintain stable development, he said.
The government will coordinate the supply of coal, power, oil and transport next year, speed up structural adjustment, change the economic growth mode and strive to set up a resource-saving and environment-friendly society, he said.