MercoPress. South Atlantic News Agency

China the world's leading steel producer and exporter

China has become a net steel exporter for the first time with exports up 92% year reaching 33 million tons in the first ten months of 2006. Simultaneously China's steel imports dropped 29% to 15.5 million tons, reports Xinhua.

It's the first time in over two decades that China's steel exports surpassed imports. Between 1981 and 2005 China's net imports of steel totaled 295 million tons according to Chen Haoran, chairman of China's Chamber of Metals, Minerals and Chemicals Imports and Exports.

However Chen cautioned that the surge in steel exports will not last as policies to cut export tax rebates and slash production begin to take effect next year. Last September Beijing announced that steel, cement, non ferrous metals, textiles ceramics and crystal exports will see the reimbursement of VAT drop from 13 to 11%.

Furthermore a steel industry restructuring plan will scale down steel production by 55 million tons in 2007. Most foundries to be closed down and demolished are in north and east China where most of the outdated iron and steel production (81% and 59%) is concentrated, according to Xinhua.

A report from China's National Development and Reform Commission states that the country's steel production capacity reached 470 million tons at the end of 2005 with another 150 million tons in the pipeline. However steel consumption stood at 350 million tons, therefore the urge to rationalize the industry.

During the last ten years China produced more steel than any other country, reaching 352 million tons in 2005, a third of the world total, points out the National Development and Reform Commission.

China's steel exports surge has caused problems with Japan and the European Union. This week BaoSteel, China's major iron and steel producer and ranked fifth worldwide announced it had reached a "strategic" agreement with Japan's Nippos Steel and South Korea's POSCO which becomes effective in 2010.