The removal of tax rebates on some steel products "reflects China's increasingly prudent attitude towards exports of resources including steel," said Shan Shanghua, Secretary General of the China Iron and Steel Association (CISA).
The contradiction between high iron ore imports and massive steel product exports reflects the dilemma of China's position in the steel industry.
China does not have the abundant raw materials for steel production, and its iron ore import dependency has reached 70 percent. However, China remains a major exporter of steel products. The country's steel exports have increased 266 percent year on year to 4.9 million tons.
"China shouldn't become the supply base for the world steel industry and will not release favourable policies for numerous exports of steel products," Shan said.
He said that the export of steel means the export of resources, raw materials, energy and means more pollution and admitted that the repeal of rebates would affect China's domestic steel products market in the short term.
"But the steel market won't witness a deep slump in the long run and the removal will help to boost the transformation of the development mode," he said.

The Vice General Secretary of the China Iron and Steel Association (CISA), Qi Xiangdong, stated that they expect the domestic steel prices to recover in the near future following the recent sudden slump caused by changes in China's macroeconomic policies and decreased demand since late April.
Qi remarked, "The slump in steel prices is abnormal, and has resulted in great losses at steel companies." Meanwhile, he estimated that China's steel consumption in May 2010 would increase by 10 percent to around 50 million metric tons.
Qi indicated three factors, which could help, stabilise steel prices and restore market confidence. Firstly, China's macroeconomic policy should maintain the consistency and stability in order to stabilise sentiment among domestic enterprises. Secondly, steel companies should maintain a balance between supply and demand by setting production plans in accordance with sale volumes. Thirdly, steel companies, distributors and end-customers should maintain reasonable inventory levels.
The CISA official added that it would be hard for the steel companies to increase their profits in the second half of the year under pressure from both increased iron ore prices and decreased steel prices. The profits of the mills may touch bottom in July, he said. Based on the current supply-demand situation, long products and cold rolled sheet have followed a positive trend, while hot rolled coil and pipes and tubes have been under the most pressure, Qi commented.

One of China's largest steelmakers, Hebei Iron and Steel Group, is in talks with Atlas Iron Limited for a stake in a magnetite mine in Western Australia. The Chinese mill is eyeing the Ridley project, which is expected to yield 15 million tons of ore per year over the next 35 years, to bolster its iron ore supplies.
It is not specified how big a stake Hebei Iron was seeking. Officials at the company were unable to comment.

Xu Lejiang, President of Chinese steel giant Baostee Group, has affirmed that Chinese steel manufacturers have not yet compromised on the issue of the quarterly pricing system with the three global mining giants i.e. BHP Billiton, Rio Tinto and Vale but instead they have been importing iron ore supplies at more temporary contract prices.
Xu also stated that even at lower spot prices the large Chinese steel producers would still not turn to the spot market. Baosteel had previously predicted that iron ore spot prices in the third quarter of this year would be lower than contract price levels.
Xu also stated that he expects that China's volume of iron ore import in 2010 will be comparable to last year's volume.
In 2009, the volume of iron ore imported into China reached 628 million metric tons. Given the high level of iron ore prices and weak trend of steel sales prices in the domestic market, some small mills with limited financing channels have slowed down their production operations.

Beijing-based Shougang Group has signed an agreement with the provincial government of Jilin in northeast China to spend CNY 2.5 billion to take over operating Tonghua Iron and Steel Group in the province.
According to the agreement, Shougang Group will spend CNY 2.5 billion in cash to buy part of Tonghua Iron and Steel Group's shares held by the state owned Assets Supervision and Administration Commission of Jilin Province and, meanwhile, inject capital into Tonghua. The commission, at the same time, will transfer some of Tonghua's shares to Shougang Group.
The agreement received much attention one year earlier when local governments cancelled a previous takeover following a fatal riot. Jianlong Steel Holding Co, a closely held mill, scrapped its Tonghua takeover last year after workers of Tonghua, worried about layoffs, beat an executive to death.
Zhu said, “Shougang Group encourages its people to develop with the company. The benefits of employees will be paid much attention to and problems will be solved properly.”
After the takeover, Shougang Group will hold 78 percent of Tonghua and the state owned Assets Supervision and Administration Commission of Jilin Province would hold 10 percent. In addition, China Huarong Asset Management Corporation will hold 10 percent while other shareholders will own two percent.
Shougang manufactured 17.3 million tons (MT) of steel last year, making it the China's seventh largest mill. Shougang has set a goal to produce 30 MT of steel by 2012. Tonghua's annual steel production is currently around six million tons.

China plans to step up consolidation of its steel sector this year by closing small mills and improving production standards, the Ministry of Industry and Information Technology (MIIT) said.
Steel enterprises would be held to toughen environmental and resource consumption standards and would be forced to control overcapacity and shut down obsolete facilities, said Li Yizhong, Minister of MIIT.
In a new policy document, the MIIT reiterated China's pledge to eliminate mills that produced less than one million tons of crude steel last year, whereas, manufacturers of higher end steel will have to produce more than 300,000 tons a year to stay in business.

China's Anshan Iron and Steel Group Corp called for maintaining a fair market environment in the US after 50 US lawmakers sought to block its investment in a US steel company.
In a statement, the steel mill said its investments in the US and other regions were commercial acts based upon market demands and also an attempt in international cooperation.
In a letter to the US Treasury Secretary Timothy Geithner, the Congressmen said the joint rebar venture proposed by Anshan Iron and Steel and U S's Steel Development Co threatens "American jobs" and "National security".
The steel bars produced at US $175 million facility, in which Anshan Iron and Steel has a 14 percent stake, would mainly substitute imports. The 300,000 tons plant in Amory, Mississippi would create jobs and increase tax revenues and would not harm local suppliers, it said.
The company said, "We chose the U S because it has a perfect law system. We believe the U S has given, and will continue to give, all businesses that respect local laws and customs, the same market environment."
Qi Xiangdong, Deputy Secretary-General of the China Iron and Steel Association, urged western countries to maintain a proper attitude towards global trade and economic globalisation.