* Chinese steel mills no longer expanding capacity-CISA
* Chinese mills under pressure, more defaults seen
* Vale sees 240 mln T in additional iron ore capacity in
(Adds quotes, details, background)
By Manolo Serapio Jr and Rujun Shen
SINGAPORE, May 7 China's steel output has
plateaued as tougher environmental measures have curbed capacity
expansion with mills also pressured by tighter credit, China's
steel association said, despite rapid expansion by iron ore
Iron ore prices have fallen more than 20 percent this year
due to an expected surplus in global iron supplies and slower
demand growth by No. 1 consumer China.
"The urge to expand has been curbed," Wang Xiaoqi, vice
president of the China Iron and Steel Association told an
industry conference. "Companies are no longer expanding
capacity. They are putting an emphasis on environmental
The fight against pollution has led to the shutdown of some
steel mills in China, the world's biggest producer of the alloy,
where output reached a record 779 million tonnes last year.
Tight credit has also increased costs for steel makers by 22
percent in the first quarter from a year ago, the association
"China's steel industry is faced with great pressure and
many trading companies and mills are going for offshore
financing to support themselves," Zhang Dianbo, assistant
president at Baosteel Group said at the conference.
"There will be more defaults happening but this is not the
mainstream," Zhang said when asked if more steel firms will go
out of business. Baosteel has forecast China's total crude steel
output will rise 3.8 percent in 2014 to 809 million tonnes.
Growing jitters about the financial health of bloated
industries in China including steel have prompted many banks to
cut lending in these sectors.
"The iron and steel industry has entered a real winter,"
said Yang Siming, chairman and chief executive of Nanjing Iron
and Steel Group.
"There is excessive production capacity, the growth in steel
consumption is slacking, companies are losing money and facing
tight credit, bankruptcy is emerging," he said.
But global iron ore miners Vale and BHP Billiton
are forging ahead with their expansion plans, confident
that China will be able to continue to absorb the additional
"Growth in steel demand has a long way to go before peaking
out," said Claudio Alves, global director for marketing and
sales at top iron ore miner Vale.
Global iron ore suppliers are expected to bring in
additional capacity of a total 240 million tonnes this year and
next, said Alves, about a third of China's imports last year.
"Most of this will come from Australia and Brazil and all
these tonnages will go to China," he said, adding Vale spends
$21-$22 to produce a tonne of iron ore, just a fifth of the
current spot price of $106 .IO62-CNI=SI.
Vale is on course to increase annual iron ore output to 450
million tonnes after 2018 from 306 million tonnes last year and
third-ranked BHP Billiton is set to increase its annual capacity
to up to 270 million tonnes from a forecast 217 million tonnes
this year as it pushes ahead with new mine work in Australia.
Globally, BHP sees steel demand growth remaining strong over
the next 10 years and to moderate after that.
"We see strong global steel demand to continue to underpin
demand for iron ore," said Michiel Hovers, vice president for
marketing at BHP.
(Reporting by Manolo Serapio Jr. and Rujun Shen; Editing by
Muralikumar Anantharaman and Richard Pullin)