China's Plan to Assist Mills With Steel Stockpile Founders

BEIJING -- China has shelved a proposal to create a steel stockpile, first publicly broached in early December to help flagging mills, as consensus fell apart on how much steel to buy, an industry official said Tuesday.

The government's discussions with the industry foundered on the proposed purchase volume, said Shan Shanghua, secretary-general of the China Iron and Steel Association.
"It's a complicated question. After investigation, it was decided that the steel reserve policy would be revoked. It will not proceed for now," he said.
Mr. Shan said there was also disagreement on what type of steel or ore-related products to stockpile.

Initial proposals were floated for a stockpile of five million metric tons and then it rose to 15 million tons, an analyst with a Beijing-based metals consultancy said.

But even the increased volume would be minimal compared with China's annual steel consumption of about 495 million tons, roughly the same as its production level.

"There was a question of whether they shouldn't go ahead with a stockpile, because if it's too small, it won't affect the market, and if it's too large, it would cost a lot," the analyst said.
At late December prices, 15 million tons of hot-rolled sheet would have cost Beijing roughly 55.3 billion yuan, or about $8 billion.

Beijing also faced a dilemma on whether to step in to rescue an industry that appears to be slowly mending on its own.

China's steel demand has climbed on the back of Beijing's four trillion yuan stimulus package, mostly to be spent on steel-reliant infrastructure and housing.

Officials from the Ministry of Industry and Information Technology, whose head first broached the idea, declined to comment Tuesday.

Separately, the European Commission will place temporary duties on imported steel wire rods from China and Moldova while it investigates if permanent duties are necessary, European Union diplomats said Tuesday.

The move comes in response to a complaint from the European Confederation of Iron and Steel Industries, or Eurofer, whose members include steel firms such as ArcelorMittal and Thyssen Krupp AG. The European companies said Chinese and Moldovan producers were dumping their products into the EU at prices below the cost of production.

The duties will be about 25% on rods from China and about 4% for rods from Moldova, the diplomats said.