China steel exec says growth rate to slow

by: Ezra Marbach

Xie Qihua is chairwoman of China iron and steel company Shanghai Baosteel Group. Here are extracts from a recent interview she did with The Wall Street Journal (subscription required):

 On latest developments in the steel industry

....The development of the steel industry is closely associated with total economic growth in China. For nine years, China has been the biggest steel producer in the world. It produced 272 million metric tons of crude steel in 2004, about one-fourth of the world's total, much higher than the next three largest producers. Growth in recent years has been around four million to five million tons. Even so, China still imports a lot of steel products each year. In 2003, it imported 37 million tons, and 29 million tons in 2004.

On Chinese government efforts to cool economic growth affecting the steel industry

....The general target of the central government by 2020 is to double Gross Domestic Product. If so, average GDP growth must be 7% a year. Actually, the real GDP growth rate over the past two years was over 9%. Such kind of high growth has brought tight supply of oil, electricity, etc. We are facing an unbalanced development situation. That's why the central government has imposed macroeconomic controls on steel, aluminum and cement to avoid
unnecessary repeat investment in those industries.

....Another purpose is to rebalance from a quantity focus to a quality improvement. The central government also imposed policy to slow development of some industries like real estate. But there is still huge demand for materials like steel.

On the potential for demand and growth to continue at current rates

....Let's talk about America as an example. America has consumed seven billion tons of steel to develop its economy. Japan consumed four billion tons. China has consumed only two billion tons. That's why we still have a long time to go. I don't think the growth rate of China's steel industry will be as big as before.

On Baosteel becoming the largest steel company in the world

....One of the strategic goals of Baosteel for the future is to become one of the top three steel producers in the world, not the top. Baosteel has cooperation with iron ore miners in Brazil and Australia. Baosteel has very good relations with big companies and supplies products to many big companies, such as Ford Europe and General Electric Co.

On Baosteel's competitors

....In terms of capacity, Baosteel ranked No. 6 in the world. Of course, we are competing with all these big companies, but also we are cooperating with these companies. So that's why we have set up joint ventures with Arcelor and Nippon Steel to provide auto sheets. We also have a joint venture with the largest stainless-steel producer in Japan and with [German industrial conglomerate] ThyssenKrupp AG.