China steel has last chance to restructure- Angang

Sat Mar 5, 2011 12:08pm GMT

* Angang president says overcapacity eating into efficiency

* Still no timetable on merger with Benxi

* Says China mills prefer longer-term iron ore agreements

By David Stanway

BEIJING, March 5 (Reuters) - The next five years will give China's steel sector its "last chance" to resolve structural problems through a nationwide merger programme, the head of one of the country's leading steel firms said on Saturday.

Zhang Xiaogang, president of the Anshan Iron and Steel Group (Angang), issued a stark warning to the domestic steel sector, saying that efficiency was shrinking as a result of chronic overcapacity problems.

"The Chinese steel sector is facing an extremely big challenge and steel enterprises mustn't take the old road and chase their own investments, additional capacity, and their own market share at a time when there is already overproduction," he told reporters on the sidelines of a meeting of parliament.

China's steel industry, by far the world's biggest, is estimated to have a total capacity of around 800 million tonnes. Crude steel production last year stood at 627 million tonnes.

The sector has been struggling with lower margins in recent months, with steel price increases failing to match the surge in the cost of key raw materials iron ore and coking coal.   Continued...

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