[Ferro-alloys.com] On July 5^th, National Bureau of Statistics of China announced GDP increment, up 7.7 percent in Q1,7.5 percent in Q2 and 7.6percent in the first half year. It hit a four-year low record, which was likely to exert some impact on people’s mind not the actual impact on all kinds of entities.

 

As one of the mainstay industries in the national economy, iron and steel industry faced a tough situation, as a result of the depressed economy and carrying the title of excessive output. Recently National Development and Reform Commission and Ministry of Industry and Information Technology of China jointly issued a" Notice on Resolutely Curbing Blinding Expansion of Industries with Excessive Capacity", NDRC and MIIT were studying to formulate an "Overall Plan on Resolve of the Contradiction of Excessive Capacity".

 Many people think excessive capacity was a major factor for declining profits of steel industry, but the key to solving the problem was industry upgrading, not solely on tackling excessive capacity.

In addition, iron and steel industry was likely to become the focus of environmental protection in the twelfth five-year plan period. In the opinion of the government, iron and steel industry belonged to highly polluting industry, mostly contributing to PM2.5, although no one could tell how much iron and steel industry made a contribution to PM2.5. Steel industry was capped with high energy consumption and high pollution, which meant steel and iron was the greatest target of pollution control.

 

Resolve of excessive capacity and environmental protection would put great impact on steel industry production and development, which would ease the situation of supply over demand. But Mr. Zheng Yuchun from China Steel Development and Research Institute pointed that the effect was short-term and limited and he called on government officials to make an investigation first before they would make a policy.

 

The following was his opinions on economy and steel industry future:

 

Firstly, investment was the primary driving force for economic growth, which meant demand for steel would keep increasing, but with limited space. Secondly, resolve of excessive capacity and environmental protection would somewhat improve the supply-and-demand relationship, but not the pattern of supply over demand, steel price would rebound with small degrees. Lastly, steel output increase would push the demand for increasing energy consumption, price of raw materials would be under pressure, as a result of declining profits and supply over demand.