Strict controls shake up sector

PUBLISHED : Wednesday, 24 February, 1999, 12:00am
UPDATED : Wednesday, 24 February, 1999, 12:00am

The National Metallurgical Bureau has adopted strict methods to regulate the mainland's steel market during the next three years in a bid to reduce production and cut losses.

No new steel-making projects will be approved for the next three years and projects without approval will be stopped immediately, the People's Daily reported.

The bureau will also reduce the number of steel production permits - which will reduce inferior steel production by two million tonnes - and mergers between existing bankrupt steel productions will be encouraged.

Steel-making enterprises that do not meet environmental, energy consumption, and quality criteria will be closed. Meanwhile, steel that does not meet a certain standard will not be allowed to enter the market.

The bureau hopes these methods will improve steel quality and steel companies' profits by narrowing the gap between supply and demand.

The amount of steel produced will also be cut 10 per cent this year through these measures.

Since 1993, profits earned from the steel industry have dropped 93 per cent from 29.4 billion yuan (about HK$27.3 billion) to two billion yuan even though the amount of steel produced has grown. Last year, the mainland produced more than 114 million tonnes of steel. Even though more steel is being produced each year, there are not enough buyers. As a result, steel prices have dropped dramatically. The price for steel last year was 180 yuan less than 1997.

The type of steel produced on the mainland is partially to blame for the surplus. Ninety per cent is ordinary steel that consumers do not want.

The preferred steels, such as stainless, rolled silicon and tin-plated plates make up 20 per cent, 33 per cent and 29 per cent of the market.

The mainland last year exported only 5.2 million tonnes of rolled steel. This year's target is even lower.