BEIJING, July 17 A series of "mini-stimulus"
policies designed to rejuvenate China's flagging economy will
help support steel demand over the coming months, but prices
will continue to be weighed down by a supply glut, the country's
steel association said on Thursday.
China's economy grew at an annual rate of 7.5 percent in the
second quarter, up slightly from 7.4 percent in the first three
months of the year, responding to a modest stimulus package that
included tax cuts for small firms, reserve requirement cuts for
some banks and infrastructure spending.
New housing construction helped drive an improvement in
steel demand in June, and inventory levels declined 5.65 percent
declined from the end of May, but prices still remained near
11-year lows, the China Iron and Steel Association (CISA) said.
"Steel production remains at a high level, which isn't
conducive to easing the oversupply problems in the steel market,
and it will be difficult for steel product prices to see any
large-scale recovery," it said in its monthly market report.
China's steel sector has been plagued by overcapacity, and
industry officials have expressed hope that weakening demand and
higher environmental compliance costs will help winnow out
smaller, inefficient producers.
The local government of the major producing region of Hebei
near Beijing is also planning to shut as much as 60 million
tonnes of ageing, polluting steel capacity by 2017.
Daily crude steel production still hit a record 2.31 million
tonnes in June, data from the National Bureau of Statistics
showed on Wednesday, with output over the first six months of
the year reaching 411.9 million tonnes, up 3 percent.
CISA said that while fixed asset investment in the ferrous
metals sector fell 8.4 percent to 215.7 billion yuan ($34.77
billion) in the first half of 2014, it remained at a relatively
high level and new production capacity was still coming on line.
Industry estimates suggest China's total steel capacity
stands at more than 1 billion tonnes, compared to an annual
production rate of 779 million tonnes in 2013.
($1 = 6.2035 Chinese Yuan)
(Reporting by David Stanway; Editing by Tom Hogue)