March 11, 2008	Tuesday	Rabi-ul-Awwal 2, 1429

BEIJING, March 10: China’s bigger steel makers are showing no let-up in their pursuit of expanding capacity over the next decade, trusting they’ll weather soaring raw material costs better than smaller rivals.

China’s fragmented steel industry faces a bleak year. Iron ore prices will jump by two-thirds while coal supply tightens, and government efforts to cool the economy plus strong steel prices could hurt demand in the second half.

But top steel executives at the annual meeting of China’s parliament, the National People’s Congress, said they would still expand because they believe economics may succeed where the government has failed to weed out the weak.The Congress, which started in Beijing on March 5, lasts about two weeks.

“We’re not only building capacity, we are getting there through mergers and acquisitions,” said Liu Rujun, chairman of Handan Iron and Steel Group, China’s No. 14 mill.

He expects to raise its capacity to half to 15 million tons by 2010 and to double that by 2015.

Handan, which makes steel plates for building ships and armoured tanks, has already successfully fought off takeovers by Chinese giants Baosteel and Tangshan Iron and Steel Group, parent of Tangshan Iron and Steel Co.

However a 4.6 million tons joint venture hot rolling mill with Baosteeal could be a prelude to a merger, some industry officials say.

Beijing’s efforts to force consolidation in the industry after years of production growth outstripping demand have so far failed -- the country shut 37.5 million tons of steel capacity in 2007, short of its target of 55 million tons.

China’s steel output rose by nearly 16 per cent to 489 million tons in 2007, and further output increases will only increase the strain on resources, both at home and abroad.

Even so, Wuhan Iron and Steel Group, parent of Wuhan Steel, and Baosteel both expect approval for their 10 million tons plants on China’s southern coast, and say the new capacity will be offset by closures in Guangxi and Guangdong.

The Shandong government has a similar plan to offset the large new coastal steel mill it plans in Rizhao.

Handan Steel also hopes to take over the state-owned shares of nearby Shijiazhuang Iron and Steel and Xintai Iron and Steel, with a view to one day buying control of those companies.—Reuters