In a latest China Iron and Steel Association meeting on February 17th 2008, Mr Qi Xiangdong deputy secretary general made a market focused report on behalf of the association, which includes below analysis on steel supply and demand relation this year.

China major steel production forecast in 2008

In million tonnes

First, the steel industry possesses capability of sustainable growth, yet with a slower speed. As seen from fixed asset investment in steel industry and already formed capacity description, China has had 550 million tonnes crude steel production capacity by 2007 and how to release is subject to macro environment and other external factors. In 2008, following reasons are expected to explain constraint to release of steel capacity
1. Wide surge of iron ore, coal, coke and oil prices
2. Short power supply and tight transport, esp. during the snow storm
3. Financial strains, brought up by tight monetary policy
4. Backward capacity elimination

Second, apparent consumption of crude steel on steady rise

Third, steel product and billet and slab exports present signs of abating.
Export of China's steel products hit record high in 2007, bolstered by strong demand of the international market. In 2008, neither global economy nor Chinese policy is in favor of high growth of exports again. The government put forth a slew of tax measures, raised export cost and dented competitiveness of the products for export, esp. billet/slab and long products. Meanwhile, weakening economy of the developed countries leads to slower demand for steel products, which can be observed in North America and Europe. While trade protectionism is raised, against China's big export and depreciating US dollars squeezed profit margins of its exports too.
Its predicted export of steel product and billet and slab will fall by 20 million tonnes around this year, 60% YoY plunge for the former, and a tight supply condition on the global market may widen price gap and slow export drops in turn. Import of steel product is forecast at 16 million tonnes, similar to 2007.

Fourth, steel production enters high cost era, making resource-rich enterprises increasingly competitive. The global steel industry is to unleash fiercer competition on resource acquiring, like iron ore, coal, coke, crude oil etc. Aside from hike on raw material and fuel, labor force and fixed asset investment also add to the input cost, with concerns on the national policies on bank loan, export tax, environment protection etc. In this case, those who own iron ore, coal and coke resources and well-quipped, environment-friendly and cost-economy enterprises will be advantaged.

Fifth, production cost expected as primary support to high-perched steel price Steel price rises in 2007 demonstrated the supply and demand did not lose balance. This year, the production cost will continue to rise and set floor for steel price, while closing some mills down and reducing the output. Price fluctuation is normal as long as it's within a certain degree, and the key to prevent ups and downs is believed appropriate understanding of nation's regulatory policies and preservation of fair competition order.

(Sourced from MySteel.net)