China’s freeze good news for Corus

Feb 1 2008 By Sue Scott, Evening Gazette

FREEZING conditions in China, which have wrought havoc on the population’s New Year travel plans, could bring a warm glow to the region's steel industry.

Chinese mills have been ordered to cut production in response to electricity shortages as demand for coal soars and the government slows manufacturing to conserve power for domestic heating.

One core steel making plant was reported to be closed on Wednesday. Others had cut output by as much as 50% on some lines.

One official said it would “take a long time” to restore production to previous levels.

Jon Bolton, managing director of Teesside Cast Products, Corus, said: "The fact that a major steel producer like China is pulling some of its production off-line will obviously have an impact, as China is still an exporter of steel. “The reduction in capacity from the Chinese mills will further tighten supply and make the steel that is available on the market more valuable to those who need it.”

Corus has a 10-year off-take agreement in place to supply slab from TCP to a consortium of overseas companies, namely Duferco, Marcegaglia, Dongkuk and Imsa.

While China’s steel crisis would have no immediate impact on TCP, Mr Bolton said: “it does however reinforce all of the reasons they were part of the original deal three years ago, in that they have a sure supply of highly sophisticated steel.”