China's iron and steel association says reports of the industry's overcapacity have been exaggerated.

 

"China's production capacity of iron and steel has been overestimated while market demand has been underestimated," said Qi Xiangdong, deputy secretary-general of the China Iron & Steel Association, addressing a forum on China's macro-economy Saturday in Beijing.

 

Qi estimated that China will produce 410 million tons of unprocessed steel this year, while domestic demand alone is expected to be 400 million tons.

 

He said the macro-economic environment will still allow China's iron and steel industry to develop this year, adding that the surging world economy means global demand for steel products continues to grow.

 

Statistics from China's General Administration of Customs show that the country exported 4.43 million tons of steel products in June, more than twice the amount in the same month last year.

 

The country's macro-control policy should keep domestic steel prices below the international level in the second half of the year, said Qi.

 

As a result of China's efforts to prevent overheating of its economy, the growth of investment in its steel industry has fallen from 92.6 percent in 2003 to 27.5 percent in 2005, and stood at 13.7 percent in the first five months this year.

 

Since 1996 when its output of unprocessed steel first exceeded 100 million tons, China has debated the problem of surplus production capacity in its iron and steel sector.

 

Earlier this month, the National Development and Reform Commission (NDRC), China's top economic planning body, stated that controlling output and eliminating outdated factories were priorities for the steel industry over the next five years.

 

Sources with the NDRC said that by the end of May this year, 21 blast furnaces with a total production capacity of 3.5 million tons and 12 other furnaces with a total capacity of 2.6 million tons have been retired in north China's Hebei Province.

 

Meanwhile, two or three larger factories capable of producing 30 million tons a year will be established, along with a number of steel companies each capable of producing more than 10 million tons of steel a year, according to the NDRC.

 

The NDRC hopes that China's top ten steel makers will account for half the country's total output.

 

(Xinhua News Agency July 25, 2006)