Steel production is projected to grow 10% this year, down from 23% last year as mills shift their focus on high-quality steel for shipbuilding and reduce output for construction, the Wall Street Journal reported, citing comments by Shanghai Baosteel Group Corp chair Xie Qihua.
China's largest steel producer, like others, faces slower demand for construction materials, she said, adding that demand for sheet steel should rise as the automotive industry picks up.
That's on the sales side. Supplies are something else, as noted elsewhere in this issue (see page 12). China's steel producers almost certainly look like they will pay higher prices for iron ore supplies after Asia's largest steel firm, Nippon Steel, agreed to pay 71.5% more for its supply this year, raising dire expectations that steel producers here face hikes of a similar order.
Meanwhile, Anshan Iron and Kunming Iron & Steel Steel Group announced last month that they would merge with Benxi Steel, creating China's second largest steelmaker, with an annual capacity of more than 20m tons. Frontrunner Baosteel took it well, saying the merger would help China's state-owned steel producers compete in the global marketplace. To cap the month's steel story, Baosteel said it would delay its planned sale of A shares, citing poor market conditions.
Auto market mixed
Domestic automobile prices will continue to decline in 2005 as supply continues to exceed demand, state media reported, citing a government report. Despite this trend and the rising price of steel, both auto production and sales will grow about 15% in 2005, the report said. Automobile supply is forecasted to exceed demand by about 10%. Inventory of domestic sedans has not moderated since 2004, and is believed to be at levels above a half million, state media reported, citing unnamed sources. Meanwhile, General Motors Corp introduced a new model in China recently, the first of several new offerings to come by the world's largest automaker. GM's China sales rose 27% last year to 492,000 units and the company says it is adding 100 more dealerships in the coming months, growing to 150 by year-end.
Less cotton in 2005
Land allocated to growing cotton is expected to decline 10% this year to 0.67m hectares, state media reported, citing a trade group. The trade group said the government is set to regulate the price of cotton to preempt major price fluctuations resulting from supply- demand imbalances. With the ending of ImagineChina Baosteel's Xie Qihua >> textile trade quotas in January, raw material demand is expected to soar. Domestic cotton prices increased 0.5% in January over December, according to statistics from the central bank.
Westinghouse, Areva in nuclear bids
Westinghouse Electric Co and France's Areva SA submitted bids for a US$8bn contract to build four nuclear reactors in China. Westinghouse has yet to win a contract in China, due to a previous US export ban. Areva has supplied four of China's nine working reactors. China's four planned reactors are the first of about 20 in a new US$54bn project that will quadruple China's nuclear power capacity by 2020.