The threat of Chinese steel exports undermining the health of the global steel industry has been “greatly reduced”, Lakshmi Mittal said on Wednesday after announcing a 30 per cent increase in net income for ArcelorMittal last year.
Mr Mittal, chief executive and main owner of the world’s biggest steelmaker, said the smaller amounts of Chinese-made steel entering world markets would contribute to a relatively strong year for the steel industry in 2008, in spite of the pall over the world economy.
This year, the steel industry faces the possibility of slowing demand while its costs may rise significantly. Many in the sector are expecting a 30 per cent rise in iron ore costs, likely to be announced in the next two months after negotiations between leading steelmakers and iron ore miners.
Mr Mittal said that behind the lower threat of Chinese exports were higher costs affecting Chinese steel mills – which are particularly susceptible to higher iron ore prices since they have to import virtually all their supplies – and slowing production increases.
“The year-on-year rise in Chinese steel production is now about 9 per cent, while quite recently it was 20 per cent,” Mr Mittal said.
“Also, the Chinese government is putting pressure on the industry to rein back exports, and this is having an effect.”
According to Meps, a UK steel consultancy, net exports (exports minus imports) of steel from China this year will be about 45m tonnes, down from 48.5m tonnes in 2007, a figure that was a big rise on the 30m tonnes in 2006.
Nevertheless, if European prices continue to rise at the current rate, don't be surprised to see exports from China rising toward the end of the year.