March 23, 2011 / 6:34 PM / 7 years ago

China to drive steel production to new records

LONDON (Reuters) - China and other emerging economies will drive global steel production to new records this year, said Ian Christmas, director general of the World Steel Association.

Even though monetary tightening measures may curb growth in China and other emerging countries, steel production in these regions will continue to outpace output from developed economies, he told a session of the Reuters Global Mining and Steel Summit on Wednesday.

“Some people I spoke to today talked about softening of the market here, but the reality is that there is still a pretty strong growth (forecast) for steel,” Christmas said by telephone from Beijing.

“There is no doubt that as the Chinese economy matures there will be some slowdown in the steel growth and steel intensity, but we have been saying that for a few years now and it is yet to occur. We are talking about numbers of 5, 6, 7 percent growth in China,” he said.

Asia’s mills led the world’s crude steel production rate to a new record in February, the World Steel Association (Worldsteel) said on Monday, as demand from economic recovery gathered pace.

While the world’s top steel producer thrives, the world’s second-largest producer, Japan, is starting to assess the damages caused by the earthquake and tsunami, which hit the country earlier this month.

Some of the country’s major steel plants were directly affected by the natural disaster, and some others had to halt production due to power cuts.

Despite the destruction, the Japanese steel industry is likely to go back to pre-recession steel production soon, said the Worldsteel director general.

“The Japanese are pretty resourceful people ... so I suspect relatively quickly supply issues will be resolved. So I am an optimist about the consequences for economic growth,” Christmas said.

Imports to the country are unlikely to rise, because domestic demand will be lower in the short term as the domestic manufacturing industry is affected by power cuts.

Japan’s steel exports are likely to be hurt, however, and producers in other parts of Asia may fill the supply gap left by the Japanese steel industry, if they can reach similar quality standards, Christmas said.

The Japan steel industry is leading the way in terms of consolidation, he said.

Nippon Steel, the world’s fourth-largest steel producer, and Sumitomo Metal Industries Ltd, Japan’s third-largest steelmaker, submitted a draft proposal for a planned merger to Japan’s antimonopoly watchdog last week.

“Of course the weak profitability of the companies (during the recession) meant that no one has been able to make acquisitions. But I am convinced that mergers will be back,” Christmas said adding that consolidation will speed up, especially in China.

“We will see emerging in five years some very large and important steelmakers in the world.”

Editing by Jane Baird

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