Yuan appreciation to have negative impact on Chinese steel industry

Thursday, 01 Jul 2010
China Daily quoted industry experts said the yuan appreciation is likely to have a negative impact on the steel industry in the short term despite lowering the import costs for iron ore.

The experts said China spent CNY 343 billion to import 628 million tonnes of iron ore last year. A 3% increase in the yuan value would reduce the import costs by nearly CNY 10 billion.

Ms Zhang Lin a senior analyst with Beijing based Lange Steel Research Center said "A stronger yuan would give Chinese steelmakers greater purchasing power for raw materials due to lower import costs. She said that However, the rising yuan will hit steel product exports, as well as exports from downstream sectors like electromechanical and metal products."

Mr Zhang said however from an export point of view a 3% increase in the yuan and the removal of the 9% and 13% rebates on hot rolled coil and cold rolled coil will reduce the competitiveness of Chinese steel products in the global market.

She said "Most of Chinese steel products exported overseas are low value added products and have been successful because of the price advantage. Hence it is difficult to pass on the additional costs to the exporting countries.”

Sales director from Anshan Iron and Steel Group said "It's bad news for exports. We will have to bear the extra cost as it is difficult to pass on the same to customers for the sake of maintaining good relations."

Mr Luo Bingsheng vice chairman of the China Iron and Steel Association said in a Dow Jones report that "A revaluation would certainly be beneficial for iron ore imports."