China has told banks to curb loans to steelmakers that are increasing production despite falling demand and falling prices, state media reported yesterday.
Beijing issued the order to cut or stop lending to steel producers “still expanding production capacity without considering actual market demand,” the China Securities Journal reported, citing an official notice.
The notice, which was not released publicly, also called for banks to curb or cut off loans to mills with outdated technology, the report said.
In addition, it told iron ore importers to “correctly control the volume and pace of iron ore imports in line with the actual demand of domestic steel production.”
China, the world’s biggest steel producer and consumer, imported 188.5 million tonnes of iron ore in the first four months of the year, up 22.9 percent from a year earlier, customs data showed.
State media reported yesterday the China Iron and Steel Association planned to investigate surging imports after iron ore shipped to China jumped 33 percent year-on-year last month, hitting a monthly record of 57 million tonnes.
“Amid the weakness in the domestic steel market, the imports in April were more than double the normal demand,” Shanghai Securities News reported, citing Shan Shanghua, secretary-general of the industry group.
At the end of March, the composite price index of China’s steel market was 97.59 points, 31.4 percent lower than a year earlier, the association said in late April.
Overall, domestic steel prices have been falling continuously and are currently lower than 1994 levels. China’s demand for steel has seen a mild recovery thanks to relaxed monetary policies and Beijing’s economic stimulus plans, but some makers boosted production hoping demand would soon soar again, the reports said.
The World Steel Association has forecast China’s apparent steel demand is likely to fall 5 percent this year as the ongoing global economic crisis hits the country’s exports.
It would be the first fall since 1995, when demand tumbled 17.2 percent after a real estate bubble burst, the steel association said.
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