Bloomberg quoted a senior advisor to Chinese government as saying that the government may pull back from encouraging Chinese steelmakers to get as large as global leader ArcelorMittal, as it directs mills to focus on improving product quality.

Mr Li Xinchuang, who is helping to develop a new government steel policy as president of the China Metallurgical Industry Planning & Research Institute said “We want them to focus on upgrading technologies, product quality and the environment issue. Big is not necessarily good. ArcelorMittal suffered too much last year.”

M Li said “We should try our best to improve our quality to meet market needs. Steel producers need to do better to meet requirements from shipbuilders and automakers.”

He aid that “The Chinese government may instead encourage steelmakers to get as big as 50 million tonnes through domestic consolidation. During the crisis, the smaller companies performed better than the bigger ones.”

He said that the plan may be released soon, without giving a specific timeframe.

In a November version of the policy draft, the Chinese government was considering asking steelmakers to merge to create one or two producers with annual capacity of 100 million tonnes by 2015. The rethink on the steel policy underscores government efforts to speed closure of obsolete mills and contain the grim pollution situation.

ArcelorMittal made 103.3 million tonnes of steel in 2008, according to the latest figures from the World Steel Association. Hebei Iron & Steel Group overtook Baosteel Group Corp. as China’s largest mill last year, with 40.24 million tonnes of output, according to research company Custeel.com.

Sourced from Bloomberg

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