SHANGHAI Privately owned
steel mills now account for just over half of Chinese steel
production, which poses a challenge for any serious move toward
Private mills produced about 362
million tonnes of crude steel last year, 50.5 percent of the
countrys total output of approximately 716.54 million
tonnes, Shen Wenrong, founder and president of Shagang Group,
Chinas largest privately owned steelmaker, said at the
opening ceremony for the Small and Medium-sized Metallurgy
Enterprises Chamber of Commerce.
The growth of private-mill
production from around 35 percent of total output in 2005 and
46.6 percent in 2011 was driven by greater relative spending on
new capacity and the fact that private mills generally were
more profitable than state-owned producers.
This trend will make it more
difficult for the Chinese government to increase industry
concentration. "Only when private mills are running at a loss
will they be interested in merging," a Beijing analyst told
AMM sister publication Steel First.
The profit of 79 major private
steelmakers averaged 55.4 yuan ($8.90) per tonne last year, and
as high as 70 yuan ($11.30) per tonne for mills in Hebei,
Shandong and Shanxi provinces, Shen said.
However, the overall profit
margin for Chinas steel industry averaged only 2.6 yuan
(42 cents) per tonne, according to the China Iron and Steel
"About 60 to 70 percent of
Chinas steel capacity expansion was made by private
mills," a second Beijing analyst said, adding that it was hard
to determine how much of the capacity was officially
The countrys National Development and Reform
Commission, the Ministry of Industry and Information Technology
and 10 other ministries set out guidelines in January aimed at
accelerating consolidation of nine industries, including steel,
aluminum and rare earths (
amm.com, Jan. 29).
A version of this article was first published by AMM sister
publication Steel First.