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Strategies & Market Trends : China Warehouse- More Than Crockery -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (4860)	5/23/2005 3:12:06 PM
From: RealMuLan	Read Replies (1) \| Respond to of 6370

Macro-control comes to little avail Last Updated(Beijing Time):2005-05-23 09:14 By Wang Zheng Among the six over-heated industries to be controlled listed by the National Development and Reform Commission 2004, the iron and steel industry was particularly "sentenced to death" as a warning to other industries. However, out of the expectations, the prices of iron and steel products, despite the decline of 1200 yuan/ton at that time, rallied in last June up to the level of early that year. Up till now, the iron and steel market both at home and abroad has increasingly prospered; there have been news about the price fluctuations from various sources. The soaring prices of iron and steel products can only be paralleled by those in the real estate industry. As to the prospering iron and steel market, it is the general view of the insiders that the invisible hand——market forces——has gained an upper hand over macro-control. Given the prospering iron and steel market abroad, China can hardly control the growing investments made by domestic enterprises, as the iron and steel producers can sell their products to foreign countries even though there is a shrinking need in the domestic market. Since last September, China's export of iron and steel have been on the rise. Since last year, the dire shortages of raw materials and steel supply in the overseas markets have begun to add burdens to the costs of iron and steel enterprises, thus bringing about the price hike of steel products. In 2004, the global economy grew rapidly, as a whole rather than a regional growth. Iron and steel products, as grains for industries, have become the necessities to ensure a rapid economic growth. So, a situation in which iron and steel products are in great shortages is predictable. Besides, the iron and steel products are in much shorter supply this year than in any other of the recent ten years. As China's urbanization and industrialization pick up speed with proliferating demands, iron ores are in increasing shortage, thus bringing up the prices of steel products substantially. Obviously, the macro-control by Chinese Government itself is unable to offset the tremendous forces in the global market. As a matter of fact, whatever the original intention of macro-control is, efforts to crack down on the blind construction of small iron and steel enterprises and restrict the investment in the iron and steel industry come to no avail. At present, prices of steel products with high or low technical content are soaring alike. Now, no one doubts that prices of iron and steel products will hold high at least throughout 2005. Experts maintain that prices of iron and steel products will fluctuate around the prices in the world markets, and be surely higher than the prices last year due to costs and monopoly. As to the costs, the global economic recovery in 2004 brought about great demands for iron and steel products, which in turn called for more iron ores. This has pushed up the prices of iron ores. Iron and steel enterprises in China, albeit all their efforts, have to accept prices of iron ores with an increase of 71.5 percent. The iron and steel industry in the world markets have been in recession over the past ten years. Particularly, in Europe and America, this industry has been regarded as a sunset industry, which has led to the collapses of many mines. The remaining mines have been restructured, thus forming the situation that the iron ore resources in the world are monopolized by the three major ore suppliers in the world (CVRD of Brazil, RioTinto and BHPBiliton of Australia). However, the global iron and steel industry began to recover last year, and the ore supplies have begun to demand to share the monopoly profits at the beginning of this year. It is the global situation, and the same is true in the domestic market in China. Large state-owned iron and steel works have the similar right of discourse. The price hike of raw materials is merely a chance for the price increase of iron and steel products. Hadn't it been without the price hike of raw materials, large state-owned iron and steel works would have been capable in pushing the prices of iron and steel products up at their will. The varieties of iron and steel products of these works all fall into the high-end category, i.e. their products are in short in the market. Relying on this natural monopoly force, they have successfully pushed up the prices of products of medium and top grades. The price hike of products and the enhanced sensitivity of price differences in domestic and foreign markets in regulating import and export will further increase China's import of steel products. It is particularly conspicuous for plate products with a strong affiliation. Since last October, the prices of cold rolled plates of thin specifications in domestic market have been higher than those in the overseas market; as a result, the imports of steel products grew by 130,000 tons in last November over the month before. In December, another 160 thousand tons were increased. It is predicted that this situation will maintain in 2005. Source:CE.cn en.ce.cn