If achieved it will exceed this year's predicted total of about 180 million tons, up from last year's 154 million tons.

"The steel output (in 2003) is very likely to reach a record high as long as current market growth can be maintained," said Zhu Hongren, from the State Economic and Trade Commission.

According to the commission, steel output during the first nine months this year amounted to 140.7 million tons, an increase of more than 20 percent on the same period last year.

The robust output was mainly generated by strong domestic demand, as a result of rapid increases in the nation's real estate, automotive and shipbuilding industries and infrastructure construction, the China Iron and Steel Association said.

"Better-than-expected exports of machine and electronic products also contribute to the steel output growth," said its newspaper, China Metallurgic News. China became the world's largest steel maker in 1996 with a total output of 100 million tons.

"However, we should keep close tabs on the market development and prevent the industry from falling into an area it experienced before," Zhu said.

He suggested domestic steel companies should not to be too optimistic and not expand production blindly.

The industry saw sharp decreases in steel prices and profits from 1997 to 1999 because of an oversupply on the domestic market.

Thanks to the government's macro-control measures on steel production nationwide, the industry was turned around in 2000.

According to Zhu, steel prices have increased by an average of 200 yuan (US$24) per ton from 1999.

The industry earned profits of 17.6 billion yuan (US$2.1 billion) during the first three quarters this year, compared with 21 billion yuan (US$2.5 billion) last year, Zhu said.

"The industry still faces great pressure from increasing steel imports as a result of China's entry into the World Trade Organization (WTO)," he said.

Commission statistics show China imported nearly 19 million tons of steel during the first nine months this year, up 47 percent from a year earlier.

The association forecast that total steel imports this year are expected to exceed 20 million tons.

The nation's average tariff level on steel imports has declined by 50 percent under WTO obligations. China has also removed its quota barriers on steel imports.

Zhu said domestic steel companies have benefited from the central government's 180-day temporary safeguard measures, despite the surge in steel imports.

Under the safeguard measures beginning from May 22, imports of nine steel products that exceed a certain volume are subject to extra tariffs of 7 to 26 percent.

(China Daily October 23, 2002)