China will take at least five years to achieve self-sufficiency in high value-added steel production, according to a leading metal trader. Wellnet Holdings chairman David Chan said the country's leading steel mills had yet to catch up with advanced foreign firms in terms of technology and price despite a five-year reform programme intended to foster domestic substitution of imported steel. The domestic industry's efforts to develop new markets could be set back by China's impending accession to the World Trade Organisation with competition from imports intensifying, he said. After WTO entry, the government will lose its ability to control the steel trade using administrative measures such a granting subsidies to home-grown industries. WTO entry will end protectionist measures such as trades quota and selective import licences. 'They can only resort to anti-dumping measures in compliance with the WTO rules after the accession,' Mr Chan said. China produces 110 million tonnes of steel a year, compared with domestic consumption of more than 120 million tonnes. The country satisfies the shortfall through imports, mainly high value-added products for industrial purposes. While industry leaders such as Shanghai-based Boasteel had achieved some success by shifting product focus, the industry was still weak overall, said Mr Chan. Most of the country's steel mills are scattered and small. In 1998, only 50 out of 1,700 steel firms produced more than 500,000 tonnes a year, yet they accounted for 87 per cent of national output. The seven industry leaders, each with an annual production capacity of three million tonnes or above, have a combined annual output of 48.72 million tonnes, or 42.52 per cent of the national total. Domestic producers need to alter product mixture to meet market demand given the strong competition for high end steel from producers in the Russian federation and South Korea. Average price of China-made steel is higher than those of foreign products because the domestic steel industry is inefficient. To prepare for the challenges from WTO entry, Beijing has encouraged major industry players to boost production scale through mergers and acquisition and force small, inefficient producers to close. Market leaders have been told to increase the amount of high value-added products to satisfy domestic demand and develop an export market. A case in point is production of special steel, a high-value added product. The product accounts for 15 per cent to 19 per cent of an advanced country's steel product output, compared with China's 5 per cent to 6 per cent.