China Continues Steel Output Reduction Policy

China's steel output reduction may continue through this year as the country continues its policy of limiting power supply to the mills, Bloomberg and the 21st Century Business Herald reported, citing industry ministry.

"In order to maintain the stability and consistency of current policies, we suggest the steel industry not launch any new stimulus or containment policy," said Luo Tiejun, deputy director general of the raw materials department at the Ministry of Industry and Information Technology, at the 5th China International Steel Forum 2010 held in Shanghai.

He said China's crude steel output is expected to reach 620 million to 630 million metric tons this year, and exports are expected to reach 40 million tons.

China started restricting power to mills this month as a way to contain the over-capacity and will accelerate measures to boost energy efficiency in the fourth quarter, Bloomberg reported, citing Goldman Sachs Group Inc.

As the implementation of containment policy deepens, profit margins of large and medium-sized steel enterprises in the January-July period fell to 3.14 percent, lower than the average profit margin of large and medium-sized enterprises, which stood at 6.1 percent, according to the 21st Century Business Herald, citing statistics from the China Iron & Steel Association. Profit margin of large and medium-sized steel enterprises was 7.26 percent in 2007 and decreased to 3.23 percent in 2008 and 2.46 percent in 2009, the report said.