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UPDATED: November 21, 2011 NO. 47 NOVEMBER 24, 2011
Steel Planning
China releases a new plan for the iron and steel industry centered on industrial upgrades

MORE EFFICIENT PRODUCTION: A refinery upgraded with a high energy-consuming furnace at Dalian Jinniu No.1 Steel Smelting Factory of Dongbei Special Steel Group Co. Ltd. (LIU DEBIN)

KEEPING A CLOSE EYE: A worker monitors machineryat the Dalian workshop of Dongbei Special Steel Group Co. Ltd. (LIU DEBIN)

The new 12th Five-Year Plan (2011-15) for China's iron and steel industry, recently released on the website of the Ministry of Industry and Information Technology (MIIT), says the iron and steel industry will face development opportunities, as well as severe challenges, particularly slowed growth in market demand and growing pressure to protect the environment.

MIIT figures show that during the 11th Five-Year Plan period (2006-10), China's crude steel output increased from 350 million tons to 630 million tons, an annual average growth of 12.2 percent. The market share of domestic companies rose from 92 percent to 97 percent. In 2010 the output value of the iron and steel industry reached 7 trillion yuan ($1.11 trillion), accounting for 10 percent of the country's total industrial output. The total assets of the industry stood at 6.2 trillion yuan ($979.46 billion).

"The plan was issued after repeated deliberations. It will greatly improve confidence in the iron and steel industry as well as some other related industries and will play an effective role in encouraging overseas investment in steel companies and solving the predicament of iron ore," said Ma Zhongpu, Deputy General Manager and chief analyst of Chinaccm.com (China Commodity Marketplace).

A research report released by China International Capital Corp. Ltd. on November 8 says the plan shows the government's resolution and direction to restructuring the iron and steel industry. In the short term, the plan will stimulate market sentiment, and in the long term, if the plan can be implemented effectively, it will improve the industrial structure, enhance competitiveness of the iron and steel industry in the whole industrial chain.

Achievements and challenges

Luo Tiejun, former director of the Raw Material Industries Department of the MIIT, summed up the achievements of China's iron and steel industry during the 11th Five-Year Plan period, "During the five years, the iron and steel industry experienced rapid growth with the most remarkable improvements in energy conservation and emission reduction. The five years also saw an increasingly important role played by the market in resource allocation and the development of various steel companies, all effectively supporting the steady and rapid development of the national economy."

According to Luo, the plan gives four basic judgments on the iron and steel industry. First, the scale of the iron and steel industry is large enough to serve the transformation of the industry. Second, the industry still faces increasing restrictions of resources, energy and raw material price hikes. Third, the development environment is becoming more complicated, and mutual impact between China's iron and steel industry and the world economy grows. Fourth, the industry has entered a key stage in transforming its development pattern.

"The iron and steel industry will stay with low profits for a long time and it is time that the industry transforms its development pattern," Luo said.

Luo also analyzed four major problems.

First, the varieties and quality of steel products urgently need to be upgraded.

"At present product varieties and quality can meet demand featuring high consumption with low standards, or a crude demand," Luo said.

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