Several leading Chinese steel mills are set to cut production to cope with the pressure of weak demand hanging over their iron-smelting furnaces.
Shougang Group and three other big domestic iron and steel manufacturers will slash 20 percent of their production this month amid slack domestic demand and dropping steel prices, according to Monday's China Securities Journal.
These major steel makers included Hebei Iron and Steel Group, Shandong Iron and Steel Group and Anyang Iron and Steel Group.
Hu Kai, a senior industry analyst with the Umetal.com website, told Xinhua on Monday the sagging price was the main cause of the production reduction.
"There is no signal that the steel product price would be ratcheted up in the near future, as some steel product prices remain high compared to previous years, construction-use steel products in particular."
China's real estate sector was currently in its nadir, which also pulled down steel product consumption, he added.
Steel prices on the domestic market dropped 5 percent in the week preceding the weeklong National Day holiday that started Sept. 29, according to the newspaper citing Xu Xiangchun, a mysteel.com analyst.
These steel mills would endeavor to further reduce the purchasing price of raw materials, adjust product mix and enhance communication among the companies respective management, according to the Beijing-based newspaper.
Hu said to some extent these companies had overreacted to the sluggish market as the output cutback exceeded the actual market demand decline.
Beijing-based Shougang Group declined to comment on the news report when reached by Xinhua. Its shares shed 5.31 percent to 3.39 yuan (about 50 U.S. cents) per share on Monday trading.
(Xinhua News Agency October 6, 2008)
