Baosteel says orders are falling, demand slows

Baosteel Group Corp., China's largest steelmaker, said orders are falling, signaling a slowdown in the world's fastest-growing major economy.

"The steel industry has ended the period of high growth in production and demand," Baosteel Chairman Xu Lejiang said today at a conference in Beijing. "Steel demand is not good, and we are facing falling orders from our customers."

Chinese steelmakers have cut production because of weak demand and higher raw material costs, Nanjing Iron & Steel United Co. said last month. ArcelorMittal, the world's biggest steelmaker, yesterday said it could cut output by 15 percent in Europe and the U.S. to support prices as global growth slows.

Steel output in China, the biggest producer, may be below 500 million metric tons this year, Xu said. That's at least 7.4 percent below an earlier forecast made by the China Iron and Steel Association.

China's steel demand growth slowed in August as auto sales dropped and the country's economic expansion decelerated, the China Iron and Steel Association said today.

Demand rose 6 percent last month, down from the 13 percent gain in the first seven months from a year ago, Luo Bingsheng, vice chairman of the association, told reporters in Beijing.

Prices of hot-rolled coil, a benchmark product, are down 15 percent from a June record in China.

"The continuous decline of domestic steel prices and rising iron ore costs will further squeeze steelmakers' profit and lead to more production cuts,'' Luo said. Steelmakers are also likely to buy less iron ore as demand drops, he said.

China's economy grew 10.1 percent in the second quarter, the slowest pace in two years, as global demand for exports weakened. Vehicle sales may fall short of a 10 million units target this year, the China Association of Automobile Manufacturers said yesterday. Sales dropped for the first time in three years in August, the association said.

Some Chinese steelmakers may be bought by overseas competitors should the "market situation worsens," Baosteel's Xu said. Merger and acquisitions may help the Chinese steel industry cope with the slowdown, he said.

Luxembourg-based ArcelorMittal this year was rebuffed from an attempt to increase its stake in China Oriental Group Co. and previously failed to buy a stake in Laiwu Steel Corp.

ArcelorMittal is still waiting for approval from the Chinese government over its China Oriental Group proposal, Ondra Otradovec, vice president for global merger and acquisitions, said at the same conference.