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Li Majestic, a financial weekly researcher, is not a new topic in curbing the relative overcapacity in the steel industry. At least two years ago, the seriousness of the problem had been recognized by governments and companies. At present, the relative surplus of steel production capacity needs to be rationally addressed. The relative excess capacity has been effected by the change of supply and demand to the operation of Steel Enterprises: the end of the first quarter, the country 72 large and medium-sized steel enterprises, profit overall loss of 3.308 billion yuan. Statistics show that by the end of 2008, China's crude steel production capacity reached 660 million tons, excess capacity of about 160 million tons. The Ministry of Industry recently issued a request for the elimination of backward production capacity of the "Curb iron and steel production of the rapid growth of the Emergency bulletin" is a needle "sobering." Of course, it remains to be seen when the goal of limiting the restriction can be achieved. Large steel mills to reduce production, a number of small and medium-sized steel plant expansion is currently a sharp contrast phenomenon. According to CISA's statistics, the majority of the top 50 in the production of the output is 5 million tons of small and medium-sized private steel companies, Baosteel, Wisco, Angang and other large enterprises are limited. This phenomenon has a certain seasonal factors and structural factors: the warmer weather, the increase in operating rate, the market demand for construction steel, and most of the technical content of construction steel relatively low, small and medium-sized steel enterprises to recover faster production. The temporary warming signal to the small and medium-sized steel enterprises brought about the expansion of production impulse. But most analysts say the prospects for a market recovery are uncertain. Table now, even the construction of steel, its rising sustainability is also to be seen. At the same time, hot-rolled, cold-rolled, plate and other steel price index is still low. Plate varieties are still in a downward trend. The research report of the Bank International Holdings Limited has shown the market demand from another perspective. The report argues that "in terms of the structure of electricity consumption, the operating rate is not very clear for heavy industries, such as steel and non-ferrous metals, which account for 70% of industrial electricity, and the production of crude steels, for example, has been negative for several months, and the increase in industrial value of these industries is far less than the overall increase. "Investors are also looking at the recent rebound in steel prices, which also contains elements of capital operations," he said. The basic factor that supports the future steel price trend is still the market real supply and demand relation. The rapid expansion of capacity will constrain the price of steel to increase space. China's crude steel production reached 500 million tonnes in 2008, accounting for 38% of global production. The steel industry adjustment and revitalization plan has put forward the goal for the steel to eliminate the backward production capacity: 2009 China's crude iron production 460 million tons, down 8%. At the same time, to strictly control the new production capacity, no longer approve and support pure new, expand capacity of steel projects, all projects must be obsolete as a prerequisite. Perhaps one of the obstacles to limiting production or eliminating backward productivity is that local governments are demanding that companies produce at full capacity for growth. However, no matter how complicated the game of local government and the policy of restricting restriction, as the main body of the market, the iron and steel enterprise should make rational judgment to the basic factor of market demand.
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