Chinese steel mills told to cut output

The Chinese government has announced fresh measures to scale back its steel production. According to the official Xinhua news agency, the Chinese government announced that the outdated steel-smelting ovens of 26 steel firms will be demolished next year.

The strategy is part of its overall measures to help cut Chinese steel production by 100 million tonne over the next five years.

As part of these fresh measures, the Chinese government has decided that 26 steel mills in the northern province of Hebei would cut their output.

The province is understood to produce about 21 per cent of China's total steel output.

Although in the short term, this move may not lead to a substantial improvement in global steel prices, analysts at domestic brokerage houses pointed out that it does send a strong signal that Chinese steel players will not be engaged in price wars to grab a larger share of the global steel market.

A recent Citigroup report on Asian metals and mining had said the Chinese steel surplus between January and October was 29.2 million tonne and had resulted in the surging Chinese steel exports.

According to the Brussels-based global industry body, International Iron and Steel Institute, the Chinese steel output in the first ten months of CY06 stood at 346.1 million tonne, a growth of 18.4 per cent on a year-on-year basis.

Chinese steel production during this period accounted for 34.25 per cent of the total global steel production.