It is reported that China’s private-run steel makers are attempting to expand themselves through mergers and acquisitions (M&As) before being acquired by large players.

The General Steel Incorporation is one of them in doing so. The Tianjin-based private-run steel maker announced on Wednesday that it had signed an agreement with another Chinese private steel maker, Tanshan Baotai Steel in Hebei province, to acquire a 60 percent stake of the latter.

Through the acquisition, General Steel’s production capacity, after increasing 23 percent to 7.8 million tonnes per year, would be one of China’s leading private-run steel makers.

Wang Baocai, chairman of board of Baotai Steel, comments that the acquisition is also favorable for Baotai given that industrial integration is an inevitable trend.

China is expected to release guidelines for restructuring its steel industry calling for higher concentration. With four big state-run steel makers and many small and medium-sized ones, China’s steel industry now has a supply surplus and a low industrial concentration, both of which will toll China while negotiating with international ore suppliers including Rio Tinto, BHP Billiton, and Vale.

Market watchers believe that the restructure plan may spark an industrial reshuffle in which most of small and medium sized steel makers would be swallowed up.

Since General Steel is a NYSE-listed firm, market watchers reckon that it may serve as a conduit for foreign capital to enter into China’s steel industry via the capital market.

General Steel’s Q3 report shows that it gained operational turnover of 1.21 billion US dollars in the first three quarters, yielding 75.15 million dollars of net profit.

It is reported that China Business News quoted sources with related knowledge said the Steel Industry Development Policy would tighten up the requirements in energy saving and emission reduction and adopt more flexible foreign trade measures in its latest amendment.

In terms of energy consumption, the amended guidelines would set up a higher target for leading Chinese mills. By 2015, they are required to achieve comprehensive energy consumption per tonne of steel of no more than 615 kilogram standard coal and sulfur dioxide emissions to be cut to 1.3 kilogram, smoke dust emissions to 0.8 kilogram. And steelmakers also need to meet both quantity and density limits of pollutants emissions by 2020.

The Steel Industry Restructuring and Rejuvenation Program, released in early this year has hammered out the targets to be achieved by 2011 which include comprehensive energy consumption per tonne of steel at no more than 620 kilogram standard coal, fresh water consumption per ton of steel below 5 tonnes and sulfur dioxide emissions to be cut to 1.8 kilogram, smoke dust emissions to 1.0 kilogram.

According to senior official with Taiyuan Steel Group the new industry policy would drive domestic mills to accomplish these aims in advance and this would also help phase out the obsolete steel capacity as well.

Chinese mills have suffered a string of setbacks in the benchmark ore talks these years. In a bid to gain a bigger say in annual negotiations, the authorities intend to set up a mutual beneficial trading scheme with the ore miners and are determined to put the iron ore trading agent system into practice. Both are being added to the new guidelines this time.

The new policy would also encourage import of primary products like pig iron and scrap in order to ease the supply strain in domestic market. On the other hand, the government would curb export of primary products, such as coke, ferroalloy, pig iron, scrap and rebar, while high end steel exports would be entitled to higher tax rebate.

Moreover, the requirement for steel conglomerates with annual steel capacity of over 5 million tonnes to fulfill external power supply after meeting internal demand has been scrapped this time. And those mills who are eligible for making overall development plans need to produce over 10 million tonnes of steel in 2008 compared with the threshold of over 5 million tonnes per year of steel output in 2003 in earlier edition.

It is reported that China’s steel pipe sector is facing worsening overcapacity this year due to rapid expansion of capacities but falling demand from exports.

Data from the China Steel Construction Society (CSC) show that the country’s steel pipe capacity reached 55 million tons by the end of 2008, compared with annual output of 44.16 million tons. CSC predicts that this sector’s total capacity will approach 60 million tons by 2010, more than 15 million tons higher than the actual demand.

In the past several years, China’s steel pipe sector expanded its capacities quickly due to strong demand on the international market and price advantage of domestic pipes.

However, in the background of faltering overseas demand this year, the steel pipe sector’s overcapacity has become obvious.

Yan Zhesheng, chairman of the China Steel Pipe Association under the CSC, noted that the rising trade protectionism has further damaged China’s steel pipe exports. The U.S. initiated anti-dumping and countervailing investigations into seamless steel pipes imported from China in early October and decided to slap preliminary anti-dumping duties on made-in-China steel pipes on November 5.

Therefore, China’s steel pipe exports may suffer persistent impact from trade protectionism in the following observation period for anti-dumping and anti-subsidy investigations usually ranging from three to five years.

According to the latest statistics, the stockpiles of steel products in 26 major Chinese cities had dropped to 11.36 million tons by November 6, down 5.3 percent from mid October.

Among the stockpiles, those of building steels, cold-rolled sheets, and medium plates had been dropping for three consecutive weeks, with those of building steels dropping the most.

The Shanghai spot market shows that China’s steel prices had been rising for three consecutive weeks. Prices of building steels rose by up to 10 percent, more significantly than any other steel products.

Analysts attribute the price rise mainly to the expected rise in iron ore and coke prices. There is also strong momentum on the futures market which is pushing up spot prices, as traders and downstream consumers are more willing to place orders, which has eaten away at stockpiles.

However, as we all know that China’s steel supply and demand situation has not fundamentally changed.

It is reported that China’s first ferroalloy exchange opened on Monday in Tianjin, which is also the first electronic trading platform in the global range.

China has become the world’s largest ferroalloy producer, consumer, and exporter in recent years.

Tianjin is one of China’s largest ports for the import and export of ferroalloy.

From January to September of this year, China produced altogether 15.195 million tons of ferroalloy, 4.4 percent more than one year prior.