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  • Govt looks to cap iron ore rates, likely to limit steel output

    Beijing is likely to introduce environmental rules and other measures to limit Chinese steel output next year in an attempt to keep a lid on iron ore prices, according to traders and industry officials. They said big steel mills such as Baoshan Iron and Steel had asked Beijing for help ahead of negotiations with the world’s top miners on ’06 iron ore prices.

    Chinese mills are determined to keep their ’06 iron ore costs down, while the mines, such as Brazil’s Companhia Vale do Rio Doce, hope to raise prices by as much as 20% after a 71.5% jump this year. “The government will control overall production next year,” said an iron ore trader at a Chinese house. “The government wants to hold down the overall production to control iron ore prices.”

    On Wednesday, the State Council Development Research Centre predicted China, the world’s top steel producer and top consumer, will see the metal’s surplus almost triple to 116.5mt in ’06 -equivalent to Japan’s annual output. It expects a surplus of 43m tonnes this year.

    Many industry officials dismissed the forecast as too large. They said many mills were already winding down output because of the glut that has cut steel product prices by nearly 30% since March. Still, they agreed, the industry needs to restrict expansion and to streamline, with exports no longer offering a solution for the country’s growing steel surplus. “The overproduction is not quite as serious as mentioned in the report,” said Li Xinchuang, vice-president at China Metallurgical Industry Planning & Research Institute.

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