According to NDRC, China's steel industry has been trying to offset the additional cost by improving management and innovation and pushing forward technical upgrade and emission reduction. Over all, the industry held on a steady growing trend.

Performance

1. Steel output grew steadily, yet at a slowed rate. In January to May, the nation's steel production hit 216.11 million tonnes up by 18.63 million tonnes or 9.4% YoY, 10.5 percentage points down from the comparable figure of last year; steel product output recorded 218.67 million tonnes up by 27.37 million tonnes or 12.5% down by 11.4 percentage points.

2. Steel product export declined while the value increased. Export of steel products went down prominently due to the tax change and RMB appreciation. In January to May export of steel billet came to 110,000 tonnes down by 96.9% YoY while that of finished products lost 20.8% to 21.71 million tonnes. The export value gained 10.3% to USD 19.8 billion.

3. Steel Price rose fast. By end-May, the composite steel price index was 156.86 points up by 31.49 points or 25.1% from the year start or up 43.52 points or 38.4% YoY. To be specific, the longs price index stood at 164.75 points up by 50.05 points or 57.4% YoY while the flats posted 155.94 points up by 37.73 points or 31.9%. The price rise is considered conditionally reasonable, since the demand has kept strong boosted by fast-growing fixed asset investment and economy, the materials and fuels prices have rocked up across the board, and the international market's soundness also gives a push.

4. Profitability remained on a high level. The Industry's profits kept a high growth from last year's. The metallurgical sectors earned CNY 142.6 billion up by 50.8% YoY up by 12.2 percentage points from January to February.
5. M&A picked up and the industry layout tended to be reasonable. Shandong Province witnessed combination of Jinan Steel Group and Laiwu Steel Group. Hebei also set up a bigger steel group by further regrouping Handan Steel and brought the capacity to 31 million tonnes per year. Beijing nodded Baosteel's integrating Guangdong steel enterprises, while WISCO stepped into substantial stage to take over the mill in Guangxi. The picture is getting clearer with setting up of Caofeidian Jingtang item, Yingkou Bayuquan project and approval for Fangchenggang's.

Some points still need attention in development

1. On export, shipping out of steel products still stepped up MoM standing at 3.11 million tonnes, 4.15 million tonnes, 4.77 million tonnes and 5.56 million tonnes from February to May, while May export figure exceeded the average of last year's. Additionally, there was a tendency that exemption of export tax for alloyed product was utilized by the exporters who ship out common bar & rod and sections, leading to big surge in export of so called alloyed rod &bar and sections. Sheet/plate export was in the same case.

2. On investment, the steel industry continued last year's rebounding trend. Fixed asset investment in the steel industry recovered in 2007 by a growth rate of 12.2% after five years of consecutive speedy growth during 2001 to 2005 followed by a minus in 2006. In January to May 2008 the ferrous metals smelting and processing industry completed investments of CNY 96.55 billion up by 22.45 YoY 17.5 percentage points higher than last year's comparable figure.

3. On energy saving and emission reduction, first, the keynote steelmakers' per ton steel making comprehensive energy consumption increased this January to April, though it has been coming down in past years, to 628.2 Kilogram coal equivalent from 623.4 Kilogram coal equivalent in the same period of last year. Second, emission of sulfur dioxide also grew 1.43% YoY.

4. On M&A, the ongoing programs are mostly inside a province, which is difficult to lead to optimized resource allocation in the nationwide range. Compared with the developed nations, China's steel industry remains low concentrated with a huge number of small and scattered-distributed enterprises. Objectively speaking, the industry is unable to take the initiative in adjusting output and holding on pricing power. There is still serious blind, repeated construction, the self reliant innovative capability is low and it's hard to ensure supply of the materials.