China's industry, government leaders revisit old topic of steel reform

May 18, 2009 | 10:36 AM |

China's steel industry leaders are making a concerted effort to play down steel market prospects for this year, as they promise—yet again—to bring more order to iron ore supply and steel production.

Xu Lejiang, chairman of Baosteel Group Corp. Ltd., warned last week that the Chinese steel industry could fall into the red this year as overcapacity and overproduction curb any prolonged price recovery.

"China's steel capacity has reached 650 million tonnes, but with very obvious structural contradictions," Xu said last week at a forum in Shanghai.

The problem is that the large number of small swing producers can come back into action whenever prices become more reasonable, and the oversupply cycle kicks in again. This is what happens when industry ownership is too fragmented.....

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