Financial crisis spreads into the physical economy since 2008 has hit a big blow on China's steel industry. The all around deficits emerged in the industry after last Oct under dual pressures from upstream price fluctuations like iron ore and coke and downstream sluggish demands.

Large steelmakers are likely to survive through the crisis with their own capacity and outside supports, while small & medium steelmakers are on the verge of closedown. In fact, many small mills were forced to stop productions since the Q3 of last year. And China's steel industry has yet to walk out the cold winter" despite a short term rebound stimulated by a series of demands-stimulating policies issued by Govs.

Analysts of economic suggested that under recent conditions, they can seize a position in the market by producing specialties, seeking complementary regrouping and extending industrial chains.

Small mills can yield unique products without high tech requirements to fill empty fields, when they have no advantages in high tech productions compared with large mills. There are two successes: angle steel producer Tianjin Zhaobo Industrial Company Limited and steel strip producer Hebei Qianjin Steel Group Company Limited both has become the leading mill in related products sector. In short, production specialization is a way for these mills to be heads in relevant markets.

Meanwhile, small mills can seek to cooperate with large mills in complementary regrouping. In this way, large mills might separate their low value added products and focus on the production of high value added goods. And small mills may come in for the low value added products as complementarities. In addition, small mills still can properly enlarge their sales network in this way, stretching hands into large mills' markets.

To improve anti crisis ability, small mills need to extend their industrial chains. They can strength the control on the supply of raw materials like iron ore to lower operating cost. Moreover, small mills are possible to offer relevant services to large mills and other industries since they are sensitive to the market changes and easier to make countermeasures. There is a big obsolete capacity of about 100 million tonnes in China at the moment; those small mills with high energy consumption, high pollution and low production have to exit the market initiatively as per national policies.

(Sourced from xinhuanet.com)