Baosteel starts production at new plant in Zhanjiang

Baosteel commenced steel production at a new facility in China's southern port city of Zhanjiang, even as steel prices plummeted amid sluggish demand in the country, which is experiencing the slowest economic growth rate in 25 years.

Blast furnace # 1 was lit at the new plant on Friday, designed to provide a capacity of 4.1 million tons of molten iron per year. The facility will be fully operational in a year with an expected annual crude steel output of 8.75 million tonnes, Baosteel said. It will also take three to six months before commercial operation of the new steel plant begins.

At the same time, Chinese factories are facing a reduction in domestic demand in the country, which produces more than half of the world's steel products. On the Shanghai Futures Exchange, demand for rebar used in construction has nearly halved in the past two years, while demand for hot rolled coils used in the automotive industry has fallen 42 percent since March last year.



Baosteel said last month that the company expects net income to fall 50 to 60 percent in the first nine months of the year, citing foreign exchange losses related to debt restructuring following the devaluation of the yuan.

However, steel consumption in China has not peaked, experts say, and demand still has some room. China's steel consumption peaks are still ahead, "but of course the growth will be much more gradual." Despite the slowdown in growth, China remains the world's economic engine. Further urbanization and infrastructure projects in China will drive demand for iron ore, steel, copper and other non-ferrous metals, experts say.