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China's steel industry faces reshuffle

China's Ministry of Industry and Information Technology on Monday said it will unleash a newguidance for restructuring China's key manufacturers.

And the country's dire steel factories are its main target. Industry experts say a widerestructuring of the entire steel industry will be inevitable. But this could actually present itselfas an opportunity for big industry players to consolidate.

Over-produced Chinese steel manufactures have almost no option than restructuringthemselves. In the first 9 months of the year, the country's steel industry suffered a combinedloss of as high as 5.5 billion yuan, reversing last year's staggering profit of 38.7 billion yuan.

Wang Xiaoqi, vice-president of China Iron & Steel Association, said, "Over production and lowconcentration of manufacturers have led to our low prices in the steel market. Everyone isengaging in a cut-throat competition, which further presses prices down to the 1994 level. Thetrue solution to this matter, we will have to obsolete some factories with low competence."

Statistics show the profit of steel industry is at its 10-year low, with production costs, rawmaterials, fuel, and labour costs all going up faster than the price of steel. The governmentwants this round of restructuring to follow market economy rules, which means productionaccording to demand.

The policy also aims to optimize the structure of production, and enlarge the economy of scale.Customs data shows that China's iron ore imports have surged by more than three times from2003 to 2011, but the price has risen about four times during this period.

China Steel Industry Face Reshuffle