Steel production in China may increase 10 percent this year, which would seriously impact the global steel market's oversupply problems. During the first three quarters of this year, China steel output climbed 7.5 percent to 420 million tons. The China Iron & Steel Association forecast that crude steel output would swell by 50 million tons to 550 million tons this year, according to official data. Meanwhile, the association noted that China steel production capacity is expected to climb 58 million tons to top 718 million tons.
The association warned that China's steel oversupply has hurt steel prices and reduced profit margins, which could continue to impact steel trade in 2010.
The CISA says stockpiles of steel at 26 Chinese cities grew nearly 50 percent to some 11 million tons during the first three quarters of this year.

Jinan Steel and Laiwu Steel, the two listed companies under Shandong Steel Group both announced last evening to close share trading in order to arranging about the important asset recombination under Shandong Steel Group.
According to a report, insiders guessed that Shandong Steel Group might imitate Hebei Steel in reconstructing the subsidiary listed companies and Jinan Steel is likely to be picked out as the leader in reconstruction. According to the released plan, Hebei Steel which owns three listed arms-Tangshan Steel, Handan Steel and Chengde Steel is to choose Tangshan Steel as the leader to merge the other listed companies and build the new Tangshan Steel into the only listed company under Hebei Steel. And, the plan already won the approval of China Securities Regulation Commission on September 21st.
An analyst of CITICS said “Shandong Steel is possible to apply similar way of Hebei Steel to combine its assets, but it's hard to say detail operations.” In late July, Shandong Steel Group held an official meeting and definitely required its listed companies to follow the unification of personnel, financial affair, material, production, supply and marketing, which regarded as the foretell of the group's recombination.
The material recombination picked up after Shandong Steel Group acquiring Rizhao Steel two months ago. An analyst in steel industry said “The recombination includes Rizhao Steel. It's more possible that Jinan Steel will take charge of the recombination of absorbing the other listed companies' assets by exchanges shares, since Jinan Steel has more powerful capacity.”
According to the data in Q3, the total assets of Jinan Steel reached as much as CNY 28.8 billion while that of Laiwu Steel posted at CNY 16.2 billion. Besides, the two mills made similar revenue in the first three quarters respectively at CNY 18.7 billion and CNY 20 billion. In addition, Jinan Steel released just several days ago to raise not more than CNY 0.65 billion by privately issuing shares at price of CNY 4.48 per ton for its converter project and roughing mill upgrading project. The analyst said, “This private placement refers to a big amount of shares, which indicates the future position of Jinan Steel in the recombination.”
In recent time, the share market is right in the upward channel, despite the slight fall on Friday, thus Jinan Steel and Laiwu Steel share price still have a rising space. The analyst said, “It's a good time for Shandong Steel Group to deal with the consolidation.

Although steel block attracted dominant capital last week, its net profit eyed a slump against other blue chip stocks. Chinese leading steel maker Baosteel Group registered a sharp dive of 70 percent with its net profit in the first three quarters, WISCO posted a tumble of 85 percent in the same period and Lingyuan Iron & Steel Co Ltd lost 32 percent.
Steel makers'Q1 to Q3 business performance posted an expanding YoY lost compared with the interim report. The price rise of raw and unprocessed materials including iron ore will be mainly accountable for the cost increase and profit loss, just as what WISCO leading official said that the rally in steel market cannot go abreast with the pace of the global materials market recovery.
The paper also observed that the range of the profit decline with the major business in the Q3 is apparently wider than that of the income decrease of the major business. Taking Baosteel as an example, it reported a lost of 33 percent with its income but a dive of 63 percent with its profit. And WISCO also saw a larger profit lost of 48 percent than its income reduction of 37 percent.
The net profit in the Q3, albeit belittled versus last year, eyed a rocketing hike from the Q2. Lingyuan Iron & Steel Co Ltd posted a dramatic soar of 530 percent from the previous season and Baosteel also an upsurge of 423 percent.
Huang Xiaokun with Wanlian Securities said the steel stock seems hard to perform satisfactorily in short term. But the financial performance is expected to go well and profit will gain largely in the Q1 or the interim report of the next year with the investment of new projects, favorable information for steel industry and the recovering export market.

The Australian government has approved a $271 million investment by China's third largest steel maker in iron ore explorer Centrex Metals. The company plans to build a new export port in South Australia with its proposed Chinese joint venture partner.
The Foreign Investment Review Board (FIRB) has unconditionally given the green light to Wuhan Iron & Steel (Group) Co (WISCO) earning a 60 percent stake in the iron ore rights to five Centrex-owned tenements on South Australia's Eyre Peninsula.
Centrex said WISCO was now gaining approval for the deal from China's State Department of Commerce. To earn its interest in the iron ore rights, WISCO will pay about $10.1 million to take a 15 percent stake in Centrex via a placement of 40 million new shares at a heavily discounted price of 25 cents per share.
WISCO's stake in Centrex reduces to 13.04 percent post-issue, so the placement does not require shareholder approval as it falls under the 15 percent threshold applying to foreign acquisitions.
Centrex chairman David Lindh said in a statement that the company's board would be expanded to accommodate WISCO nominee Liaowu Guo. WISCO also will pay Centrex up to $186 million in staged payments if the iron ore explorer achieves progressive resource delineation targets.
WISCO will further provide $75 million to Eyre Iron Pty Ltd, the 40:60 joint venture between the parties that will undertake exploration and study programs. Centrex and WISCO will form another joint venture, this time on a 50/50 basis, to build a deepwater export port on Centrex's wholly owned gulf-front land at Sheep Hill, north of Tumby Bay in South Australia.
WISCO is responsible for arranging project finance. Lindh said Centrex aimed to be a major player in Australia's iron ore industry. ''All of the cornerstones are now in place to rapidly escalate our iron ore growth on the Eyre Peninsula into a billion dollar business, with further and considerable multi-project development opportunities,'' he said.

China's crude steel output in October rose from the month before to an estimated 51.55 million tons, close to the August record of 51.65 million tons, consultancy Custeel said citing industry figures.
China's daily crude steel output in October was 1.663 million tons, up 0.85 percent from 1.649 million tons in September and totalling 607 million tons on an annualised basis.
The figure is slightly lower than the record 1.666 million tons in August, Custeel said, citing estimates from the China Iron and Steel Association (CISA). Despite long-standing overcapacity concerns, as well as a slip in prices, analysts were unsurprised by the figures.
"It came as expected," said Helen Lau, senior analyst with OSK Securities in Hong Kong.
"We talked to steel companies to ask whether they cut production in October, but none of them have. Demand from their own customers is still stable and strong," she said. China's mills produced 50.71 million tons of crude steel in September, and 420 million tons over the first nine months of the year, up 7.5 percent compared to last year. CISA said last week that total crude steel output in China this year was likely to rise 10 percent to reach around 550 million tonnes.