BEIJING - Hebei Iron & Steel Group Co Ltd, China's largest steel mill in terms of production capacity, said it would cut its annual output by 6 percent to help meet the nation's target to reduce carbon dioxide emissions by up to 45 percent by 2020.

In a statement to the Shenzhen Stock Exchange late on Tuesday, the company said that its raw steel output would fall by 1.5 million tons between September and December.

The company's move comes against the backdrop of cuts in steel output ordered across Hebei to help meet the green goal.

Xu Xiangchun, chief information officer of Mysteel Research Institute, told China Daily that the production cuts in Hebei province were too harsh and would harm the industry.

"The 40 percent cut in steel output can only be a temporary measure and, as such, will only make a limited and short-term contribution to the nation's emission reduction effort," Xu said.

Analysts said the output cuts are not only affecting steel mills' production plans, but are also taking their toll on iron ore demand.

Salespersons from Rio Tinto, Vale and BHP Billiton have started to contact their clients in Hebei province, seeking more details about the production cuts, China Securities Journal reported on Tuesday.

According to data from the General Administration of Customs, China imported 44.6 million tons of iron ore in August, 10.2 percent lower year on year.

The import price of iron ore has also dropped by about $10 since August, to $147 per ton.

"The price of iron ore will keep falling before the end of this year," said Yu Liangui, deputy director of Mysteel.

Domestic media reported the price of steel had dropped by 17 percent from April to July, while the price of iron ore had dropped 23 percent in the same period.

According to China Iron and Steel Association, 40 percent of the nation's steel mills have been affected by the government's macro-control policies.

China Daily

(China Daily 09/16/2010 page14)