In 2008 China’s steel market experienced both sharp rises steep falls. In the first half of the year, the steel market rose continuously and broke historical records, due to the following reasons:

- Snow storms occurred in January
- A temporary shortage of coke, and massive hike in iron ore contracted prices
- Production control during the Beijing Olympics
- Reconstruction in earthquake-stricken regions
- Weakening US dollar and spreading inflation all over the world
- Steel price surge at world export market
- Relaxing money supply in China’s home market. In the second half of the year, due to slowing demand, tightening money supply, the credit crunch, a steep drop in international commodity prices and the strengthening US dollar, China’s steel market nose-dived.

In 2009 China’s steel market will encounter slowing demand both internally and externally, and will present a general trend of “slow demand and low supply”. Please check SteelHome Annual Report

SteelHome 2008 Annual Report and Anticipation for 2009
http://en.steelhome.cn/n237493.html

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The Conseil de la Concurrence of French has imposed a EUR 301.78 million fine on French subsidiaries of ArcelorMittal active in steel distribution.

This is the result of an investigation started in 2004 by the DGCCRF (Direction Générale de la Concurrence, de la Consommation et de la Répression des Fraudes) into historical anticompetitive practices in the steel distribution sector in France which started in mid 1999.

ArcelorMittal takes matters of this nature extremely seriously and has a rigorous global compliance programme in place to combat anticompetitive practices.

Based on its initial review of the Conseil de la Concurrence's decision, ArcelorMittal expects to make an appeal. At this time the Company has no further comment to make on the situation.

Qi Xiangdong, the executive vice general secretary of China Iron & Steel Association (CISA) expressed on Dec.6 in Shangshai that since the third quarter of this year, China steel output notably tumbled, prices extensively plunged, more and more enterprises got losses, the whole industry faced severe challenge, and nearly 60pc large and medium steelmills operated in the red, in addition, next year, China steel production should pay attention to the pushing effects produced by macro economy and the direct and indirect export level of steel products, and actively tackle the challenges in accordance with market change.

Steel industry presented an unprecedented rapid-rebound situation since Sept.
Qi expressed that since entering New Age, with the accelerating of global economic recovery and domestic industrialization process, Chinese steel production kept high growth for seven consecutive years, crude steel can averagely grow around 20pc per year from 2001 to 2007, however, since September this year, steel industry presented an unprecedented rapid-rebound situation, while the lowest monthly output was 14.8mln tons lower than the highest point.

The latest statistics data provided by Qi Xiangdong showed that, when compared to the same period last year, profit of domestic 71 large and medium steelmills slumped 0.93pc in the first ten months this year, among which, that respectively sank 19.44pc and 72.9pc in August and September, in addition, 42 of 71 steelmills made a loss of 7.77bln yuan in October.

According to the analysis of Qi Xiangdong, the substantial reasons that lead to steelmills’ negative profit were the poor demand, sharply descendent steel price and high-level cost, what’s more, domestic steelmills’ sales profit rate was 5.58pc from January to October, but dropped to -3.23pc only in October, appeared a significant fallback situation for more visit: chinametalbiz.com

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In November this year, the financial storm caused by US credit crisis kept expanding, which shook the global economic structure. The impacts on real economy intensified. Data released by US Department of Labor showed that the CPI index in US fell 1pc in Oct. from the previous month, the largest decline within recent 61 months. The report from US Department of Commerce revealed that new houses being built plunged by 4.5pc in Oct., the lowest since 1947, which indicate the serious economic slump in US.

The monthly investigation from European Commission showed that the integrated prosperity index in Euro zone dropped from 80.0 in Oct. to 74.9 in Nov., the lowest since Aug., 1993 and far below than the prediction of 78.0 from economists.

Nations like Japan, South Korea and India, etc. fell into the same economic recessions. The latest report from IMF pointed that global economic fell into downturn, and the export increase from Asia shrank drastically. Meanwhile, the economic growth will slow down sharply. Therefore, the expectation of GDP growth in 2008 and 2009 on Asia was reduced to 6pc and 4.9pc respectively from chinametalbiz.com

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In recent one week, in Shangshai and its surrounding market, construction steel demand, such as deformed bar (debar) and wire rod seems appearing an operating situation of reconditioning and price comeback, the exchange becomes more active than previously, traders’ sales soars to some extent and hold an optimistic view on latter market, however, some uneasiness still lurks in some operators’ mind.

Liang Taigeng, the general manager of Shangshai Hualei Enterprise Development Co., Ltd expressed that debar price still had a fluctuant and rebounding process within this year, so it was difficult to apparently jump.

According to the market investigation from Shangshai Hualei, debar price in Shangshai market began to rebound from the bottom when entering mid-November after suffering a continuous fluctuation and comeback, and slightly fell back this week and was generally higher than that in Beijing and Tianjin market, from chinametalbiz.com.

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CR plate market showed no indications of recovery with continuously price decline in recent days and merchants were pessimistic about later market. However, analysts predicted that the price decline of CR plate will probably not stop in a short period but will slow down and turn to be stable.
According to market research, price of CR plate in Shanghai kept decreasing last week, with the average decline at 200 Yuan per ton. This is the same with markets in other areas. For example, the price fell 150-200 Yuan per ton with one week in Hangzhou city and Jinan city. Besides, the price decline trend was so string that there seemed to be no indications of recovery with poor transactions and strong wait-and-see attitude. Merchants predicted that price decline will continue so they dared not to increase inventory as demands remained decreasing.
Because market resources kept increasing, which intensified the contradiction between the supply and the demand, some analyst denoted. News from steel enterprises showed that CR plate inventory remained high which caused great pressure. Steel enterprises are eager to sell even at low prices to speed up inventory delivery, which affected spot price directly. For example, the current price of 1.0mm CR plate was only around 3,750-3,950 Yuan per ton in east China, down 150-300 Yuan per ton. It’s from chinametalbiz.com.
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With the approaching of the iron ore negotiation, it becomes expecting whether domestic steel enterprises could break through the restrictions from international iron ore giants. What worries steel industry is that under the circumstances of global economic slowdown, high-costs and low downstream demands, the potential risks and difficulties in profit making become intensified in steel industry. Therefore, the reorganization and industrial concentration of has become a new focus in steel industry.

Statistic data from China Iron and Steel Association (CISA) showed that in Jan.-Aug., production costs of domestic steel enterprises soared 60pc, while domestic steel prices started plunging since July with demand decline continued. By October, over 60pc of large and medium steel enterprises were in profit losses, while the deficit had reached 1.154 billion Yuan in Jan.-Sept. this year, 18.06 times up over the same period last year. As the steel production capacity exceeds that of the demand, steel enterprises with poor management will be forced to shut down or restructured and only by the reorganization with enterprises that have secured resources, advanced technology and equipment and stable market could they get rid of the eliminated destiny.

An official from State-owned Assets Supervision and Administration Commission (SASCC) expressed the same opinion “The time for the survival of the fittest in steel industry has arrived. The reorganization by the government promoted little as steel industry was always in fine condition. But now the market will show its huge power.” From metalbiz.com

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