Thursday, January 08, 2009
China may not build up steel reserves
Thursday, 08 January 2009
China is likely to give up a plan to build up state reserves in steel as the government and industry association have found it to be an impractical task, state media reported on Wednesday. Beijing is taking advantage of a collapse in energy and commodity prices to stock up reserves in various metals such as aluminium, as well as cotton, rubber and crops. Li Yizhong, head of the Industry and Information Technology Ministry, floated the idea last month of buying up steel products for reserves in an attempt to help the country's steel mills.
But after discussing the plan, it appeared there were minimal chances of putting it into action, the official Shanghai Securities News cited unnamed government officials as saying.
"Currently, it seems that the steel reserve proposal is likely to be revoked," Shan Shanghua, secretary-general of the China Iron and Steel Association, told the reporters.
The difficulty was deciding the volume and type of steel products and which firms to buy from, it said.
The government would need to spend at least 20 billion yuan ($3 billion) to soak up 5 million tonnes of steel, only 1 percent of China's annual steel production.
"The huge capital demand is unbearable," the paper said. China's steel price has fallen more than 50 per cent this year as consumption from the country's auto and shipmaking sectors slowed sharply.
But big steel mills are likely to benefit from Beijing's 4 trillion yuan ($586 billion) stimulus package, including a huge railway building programme.The newspaper also cited traders as saying that prices for some steel products were rebounding.
as adapted from Reuters
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