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Steeling for 80% export drop

CHINA'S steel product exports may tumble 80 percent this year as a global slump hurts demand, the China Iron and Steel Association said yesterday.

This was much steeper than its previous forecast of 50 percent, the industry group said in a statement on its Website quoting a speech by its Secretary-General Shan Shanghua.

A survey showed China's 28 largest steel exporters would ship only 299,100 tons this month and 129,600 tons in April, and China would probably become a net importer of steel products in March, it said.

"The export situation is extremely severe," Shan warned.

Shipments slumped 52 percent in the first two months this year, after dropping 5.5 percent to 59.23 million tons in 2008.

Sluggish exports had led to rising inventories after many mills restarted their once-closed capacities before the Spring Festival holiday in late January as they bet demand would rebound after the holiday. But demand stayed slack and the domestic benchmark price has fallen 14 percent since February, ending a short-lived recovery.

Steel stocks had risen 38 percent to 6.7 million tons by late February in China's 20 major cities from January, Shan said.

"A short-lived prosperity in steel demand, driven by heavy restocking by traders, no longer exists," he said.

On March 5, the domestic steel composite price declined to a low last seen in November, which was also the worst since 1994.

"Market prices may keep falling by small degrees in the short term, but the downward room is limited as prices are already at a low level and demand would gradually recover," Everybright Securities analyst Ding Xianda wrote.

China's 71 major mills posted an aggregate loss of 1.06 billion yuan (US$155 million) in January, much improved from December's loss of 29.1 billion yuan. But losses in February and March could extend from January, according to Shan.


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