China crude steel output growth to slow to 3.1 pct in 2014 -CISA

BEIJING Mon Jan 13, 2014 10:45pm EST

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BEIJING Jan 14 (Reuters) - China's annual steel output growth is expected to slow in 2014 to around 3 percent and reach 810 million tonnes as a result of changes in its economic strategy, the head of the country's steel association said in comments published late on Monday.

Chinese steel production has surged to nearly half the world's total in the past two decades as a result of breakneck economic growth, but Beijing is now determined to slash the excess capacity weighing down the sector as well as reduce the country's overall dependence on heavy industry.

Output in the first eleven months of 2013 reached 712.9 million tonnes, up 7.8 percent on the year, according to the latest figures from China's statistics bureau.

But Xu Lejiang, the new chairman of the China Iron and Steel Association (CISA), said the era of rapid growth in the Chinese steel industry had already come to an end, bringing longstanding problems like overcapacity into sharper focus.

"With the steady advance of urbanisation, steel product demand will continue to see a certain amount of growth, and we predict crude steel output will reach 810 million tonnes and apparent demand 750 million tonnes in 2014, rising around 3.1 percent," he said in a speech to association members on Sunday.

"But because of overcapacity, a slowdown in fixed asset investment growth and slowing demand growth for downstream products, the oversupply situation isn't likely to change much."

According to a transcript of the address published in CISA's official website (www.chinaisa.org.cn), Xu said profits in the sector were likely to remain low for the foreseeable future, with environmental and raw material costs also still rising and competition from other emerging steel producing nations expected to intensify.

Xu, also the chairman of leading steelmaker Baoshan Iron and Steel Group, the parent of Baosteel, has previously claimed that the problems in the steel sector were brought about by local government interference, with soft loans and preferential supply contracts creating "huge monsters" that had been saddled with too much production capacity.

He said in his weekend address that China's new economic reforms would reduce the role of the state in the allocation of resources, and that steel firms could only emerge from their current difficulties by becoming more responsive to the market. (Reporting by David Stanway; Editing by Muralikumar Anantharaman)

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