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05. October 2009

Chinese steel output falls in September on overcapacity concerns

It is reported that Daily crude steel output in early and mid September in China fell on a monthly basis for the first time in recent months, since domestic steel mills were forced to cut output to survive the consecutive 7 weeks steel price declines and rebounding iron ore prices.

China Business News citing figures from China Iron & Steel Association recently, daily crude steel output in mid September posted at 1.655 million tonnes off slightly from 1.67 million tonnes averaged in early September or down 11,000 tonnes from mid August. Crude steel production in China was on a record-breaking run during June and August and hit an all time high of 52.33 million tonnes in August up by 3.3% or 22% on year. And the monthly output translates into annual production of 600 million tonnes fanning wide concerns about mounting up overcapacity pressure.

Mr Zhang Fenghua head of the trading firm under Hebei Steel Group said "Current steel prices have fallen below many steel mills' costs line, pushing a number of them into deficit especially those HR steel producers. As a result, many medium and small sized mills were obliged to consider controlling output again. While according to Mysteel analyst Mr Zeng Jiesheng, root causes behind the continuous steel price falls were the sky-high supplies and production. Capacity utilization ratio reached 92% or so at the moment and the huge supply and high stocks were the dominant factors leading to market pessimism.

Some leading steel mills were also forced to cut price in light of the high stocks pressure. Shagang cut base prices for late September, while Hebei Steel Group and Baosteel, the top two steel mills in the world's biggest steel country also trimmed prices for October by a considerable size.

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