Chinese Government May not Purchase Steel for Reserve

The previously proposed steel reserve scheme may not be adopted by the Chinese government for different voices, said a source close to the National Development and Reform Commission (NDRC), quoted by Shanghai Securities News.

The source said none of NDRC, Finance Ministry and China Iron and Steel Association (CISA) approves that scheme.

"The reserve scheme was not even mentioned at the January 5 seminar which was about how to invigorate China's steel industry," said CISA general secretary Shan Shanghua.

Currently, there are over 1,000 steel plants in China, some 100 of which are large and midsize ones, altogether generating around 500 million tons of steel products annually, with over 20 kinds of major products.

Under such a situation, it is quite difficult to determine the total reverse quantity, varieties as well as the target enterprises.

Moreover, the proposed reserve quantity of 5 million tons would cost Finance Ministry some 20 billion yuan, which is too much for many to accept.

Some steel traders say they expect the market demand recovery more than the national reserve policy.

Actually, China's steel market already shows a sign of warming up at present. Price of hot-rolled sheets and rolls has risen to 3,500~3,700 yuan per ton from the lowest point of 2,800 yuan per ton in October 2008.

China's steel industry has seen a high-speed increase in investment and construction of new production capacity. Production capacity of crude steel is estimated to exceed 60 million tons by the end of 2008.