According to Mr Jia Yinsong Raw Material Department Director of Ministry of Industry and Information Technology that, the local governments had to propel the cross regional and cross ownership M&As for large sized steel companies.

The industrial concentration ratio may also be elevated to more than 60%.

Mr Jia said the backward capacity elimination measures need to be combined with M&As.

Furnaces equal to or less than 400 cubic meters and converters as well as electric furnaces equal to or less than 300 tonnes would be eliminated on the whole.

On the steelmaker list of eliminating backward capacity in 2011 released by MIIT are iron smelting capacity of 31.22 million tonnes from 96 companies and steel making capacity of 27.94 million tonnes from 58 companies including several listed steelmakers like Jinan Iron and Steel, Xinxing Ductile Pipes, Chongqing Iron and Steel.

Mr Li Shijun Chief Analyst from China Iron and Steel Association pointed out that the backward capacity elimination measures would not impact the total industry output a lot thanks to equivalent replacement method by mainly adjusting the industrial restructuring to adapt to the market development pattern.

The domestic steel industry presented undesirable in the first half year and may worsen in the second half year. To survive and win the future, the steel companies should attach more importance on the industry upgrade and downstream users product mix and demand transformation.

(Sourced from China Securities Journal)