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China May Slow Steel Production as Domestic Demand Wanes

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March 6 (Bloomberg) -- Steel production in China, the world’s biggest producer, may slow growth to 4 percent this year amid weaker demand, the China Iron and Steel Association said.

That would be less than half of the 8.9 percent growth recorded in 2011, according to the National Bureau of Statistics.

China yesterday pared the nation’s growth target to 7.5 percent this year from an 8 percent annual growth rate goal in place since 2005, a signal that the government is determined to cut reliance on exports and capital spending in favor of consumption. Some steel mills have been cutting output since the fourth quarter, Zhu said.

“Steel output volume is subject to the pace of infrastructure spending,” Zhu Jimin, the association’s chairman, said today in Beijing during the National People’s Congress. He’s also the chairman of Shougang Corp., a Beijing-based steelmaker.

China’s steel output in the first two months was 620 million metric tons annualized, Shougang’s Zhu said today. The nation produced 683.27 million tons last year.

High raw material costs and rising competition cut profit margins for Chinese steelmakers to a record low of 0.43 percent in November, the steel association had said.

“The steel mills should accelerate the pace of consolidation to cut industry overcapacity,” he said.

China won’t relax its curbs on property market as the government wants to see housing prices return to reasonable levels in the near term, Zhang Ping, head of the National Development and Reform Commission said yesterday during the congress. The nation’s construction industry accounts for 53 percent of the country’s steel demand, according to Mirae Assets Securities Co.

Slower global growth may curb demand for home appliances and the steel used to make them, Xu Lejiang, chairman of Baosteel Group Corp., the nation’s third-largest mill, said yesterday. Still, demand for steel used for automobiles this year may outpace last year as the government encourages consumption.

Shougang, China’s sixth-biggest mill by output, is building a steel plant with a partner in Malaysia, Zhu said.

The project will have an annual capacity of 1 million tons in the first-phase expansion, Zhu said. It will use iron ore from Malaysia and imports, he said.

To contact Bloomberg News staff for this story: Helen Yuan in Shanghai at hyuan@bloomberg.net

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net

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