Those Chinese boys love to gamble don't they? Lot of this is being used for construction and infrastructure, and it's tough to stop two million people a month from moving to town.
China's steel mills raise output despite appeals
By Richard McGregor in Shanghai and James Mackintosh in Munich
Published: March 17 2004 Financial Times
Chinese steelmakers are raising production, with volumes in February up a near record 37 per cent year-on-year despite Beijing's entreaties to banks and provincial governments to reduce support for the sector.
Steelmakers are straining to keep up with domestic demand, one reason so many entrepreneurs and state-owned enterprises have persisted in investing in new capacity in defiance of central edicts to hold back.
China produced 22.6m tonnes of steel in February, equivalent to 270m tonnes a year, still below what the country expects to consume in 2004, according to figures from the China Bureau of Statistics on Tuesday.
China's output in 2003 was just over 220m tonnes of steel, and another 28m-29m tonnes were imported.
The country's voracious appetite is pushing up prices, causing supply bottlenecks for steel users around the world and causing consternation for multinational investors in China itself.
Dongfeng Motor, China's largest lorry manufacturer, has begun searching for sources of cheap steel outside the country after price rises of 30 per cent last year.
The company, a joint venture between Nissan of Japan and Dongfeng Motor Corp of China, has talked to suppliers in South Korea and Japan about direct imports, although it has had little success in finding lower prices. Katsumi Nakamura, president and chief executive, said rises in other raw material prices, including plastic, oil and energy, were also hurting the company. But steel was causing the most pain.
"We have tried to find some opportunities for importing from Korea or other Asian countries," he said in an interview this month. "But it is very difficult for us to negotiate even from Korean manufacturers [of steel]. They are also enjoying the high prices."
Dongfeng hopes to keep price rises down to below 10 per cent this year, but Mr Nakamura said this might be optimistic given the shortage of steel mills in China.
Global steel prices have surged 62 per cent in dollar terms this year, causing serious problems for some smaller car parts suppliers. But most multinational vehicle manufacturers have two- to three-year contracts, shielding them from the rise. "It is basically coming from an imbalance of supply and demand," Mr Nakamura said.
About 60 per cent of the steel consumed in China is used in construction, with the other big users being heavy industry and the vehicle sector.
But it is the vehicle sector in which growth is the fastest and the possibility of an inventory build-up the most likely.
Official statistics also released yesterday showed that car production in China grew by 62.1 per cent in February year-on-year to 186,000 units, well above the rise in sales so far in the first two months of 2004 of 36 per cent. |
