Shanghai Baosteel Group Corp Sunday started the production at its 11.78 billion yuan (US$1.42 billion) stainless steel plant, which will hopefully alleviate China's insatiable demand for the product.

The project of Baosteel Group Shanghai No. 1 Iron and Steel Co Ltd, a subsidiary under China's largest and most profitable steelmaker, will be able to produce 2.57 million tons of steel products annually, 720,000 tons of which are stainless steel.

The State Council, or China's cabinet, approved the feasibility study report of the project in September 2000. Construction for the project started in May 2001.

"Commencement of production of the project is of great significance in lowering China's long-term dependence on import of stainless steel products," said Li Rongrong, director of State-owned Asset Supervision and Administration Commission of the State Council, who attended the ceremony in town.

Though the Chinese government has been cooling down investment in steelmaking industry recently, this project was approved several years ago when overinvestment in the sector was remote, officials said. It is also a key project to reshuffle the product line of China's steel industry.

At present, domestic steelmakers can meet only around one-third of the country's appetite for stainless steel. China is the world's largest user of such commodity, consuming 4.2 million tons of stainless steel last year, a year-on-year jump of 40 percent.

China imported 2.9 million tons of stainless steel products in 2003, 21 percent higher than a year ago.

As part of Baosteel's strategic development plan, it is constructing plants for plain carbon steel, stainless steel and special steel.

"This year will be a crucial year for No. 1 Iron and Steel's development," said Xie Qihua, chairwoman of Shanghai Baosteel Group Corp. "The new production line must reach the targeted output (of 2.57 million tons)."

Yong Zhiqiang, an analyst with Haitong Securities Co Ltd, said the latest project is in line with China's strategy to build up its stainless steel bases in Shanghai and Taiyuan City, Shanxi Province.

(eastday.com May 10, 2004)