China to sustain steel output growth for 5 years: research group

“Steel production in China will increase at the current pace in the next five years at least,” President Wu Wenzhang said in an interview in London Monday. “A robust economy will continue to spur domestic demand, like it did in the past 10 years.” Growth this year is an annual 14 percent, he said.

While steelmakers outside China cut output and jobs because of the global crisis, production in the country reached records in the four months through August as the state committed about US$586 billion in spending to buoy the economy. China increased imports of iron ore, used to make steel, to a record this year.

Chinese steelmakers' profits fell to a combined 30 billion yuan (US$4.4 billion) this year from about 100 million yuan in 2008, while output rose to 570 million metric tons from 500 million tons, Wu said. It's “unlikely” profitability will rise before 2012 as raw material and power costs increase, he said.

Contract iron ore prices may jump 14 percent next year to the second-highest on record, a Bloomberg survey of 11 analysts said. “Prices are still going up as demand from emerging countries will continue to surge,” Wu said. “We are likely to see a 10 percent rise in 2010,” he said at the Metal Bulletin Steel Success Strategies Conference in London.

China is seeking to increase iron ore supplies from Russia, Ukraine, South Africa and North Korea to about 15 percent of the total, from less than 10 percent now, Wu said. That would give China more bargaining power with producers including Rio Tinto Group, BHP Billiton Ltd. and Vale SA, which currently account for about 70 percent of iron ore shipped to the nation, he said.

Wu is a former market research director at Maanshan Iron & Steel Co., the second-biggest Chinese mill listed in Hong Kong.

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