It is reported that Premier Wen Jiabao pointed out three issues confronting China steel industry during his tour of inspection in Hunan on Jan.1-2, 2012.
-Overcapacity. Premier Wen stressed that we ought to act decisively to facilitate M&A and slash excessive capacity, or the primary industry would be trapped in the plight forever.
-Stubbornly high iron ore price. As a matter of fact, the raw material exporters just grabbed our soft spot of overcapacity and insufficient flexible system so that China steel mills have no other choice but to start operation, maintain production and purchase raw materials. With such huge amount of steel capacity and iron ore purchasing quantity, unfortunately, we do not have a big say in international monopolic raw material market in which the iron ore price is inflated by producers.
-Ultimately, China steel mills need to make adjustment and exercise mergers and acquisitions. Therefore, the three major pressing tasks are adjusting structure, taking M&A and upgrading technology.
The Premier highlighted that if we do not solve these issues seriously, truly and fundamentally, the nerve-wrecking fact may stay in front of us forever.
He also added that we have established a solid foundation for China steel industry in talents and equipment but what we are starving for is the scientific regulation and solid actions to adjust structural problems and implement M&A.