China's steel output, which has been falling since last May due to the government's macro-control policy, saw a 21.7 percent monthly rise to 31.82 million tons in February.

 

The growth rate was 4.3 percentage points higher than the same period of last year, according to a report in the China Securities Journal on Thursday.

 

Daily steel output hit a record 1.1365 million tons in February this year, compared with 906,000 tons in the same month last year.

 

He Xiaoying, an analyst with the Pricing Monitoring Center of the National Development and Reform Commission (NDRC), said the revival of the steel market and price hike at the beginning of this year contributed to the increase.

 

By March 31, the average price of major steel products was 4,009 yuan (501 U.S. dollars) per ton, a rise of 5.47 percent from the beginning of this year.

 

Figures from the National Bureau of Statistics showed China's output of steel products was 26.11 million tons and 25.37 million tons in January and February 2005, up 25.4 percent and 14.7 percent year on year respectively, and reached a peak of 35.5 percent in May, but growth gradually dropped to 17.4 percent in December.

 

He believed prices would continue to climb due to surging exports, the rise in the price of hot rolled steel by China's largest steelmaker Baosteel in Shanghai and five other major steel producers in North China.

 

The beginning of a new round of negotiations for the price of imported iron ore between China and major international suppliers also boosted market confidence, said He.

 

Lu Qin, a researcher with the Shiji Securities Research Institute, attributed the quick recovery of China's steel production to the operation of a batch of steel projects in the later half of 2005 and overcapacity in the sector.

 

He said the sagging price last year had offered a good opportunity to phase out out-dated manufacturing equipment and step up the regrouping of the sector.

 

The task would become more difficult if the price rise continued, he said.

 

He also warned of market risks of the expanding output, urging producers to try to avoid another round of price fluctuations as a result of oversupply and speculation.

 

Despite record daily output in February, trading volumes remained normal throughout the country, while the inventory was rising sharply, he said, adding that this meant many products had failed to reach consumers.

 

(Xinhua News Agency April 7, 2006)