Over the past week, domestic finished steel prices were higher. The Ministry of Industry and Information Technology (MIIT) last week ended a period of study and comment for its "Qualifications for Entry into the Steel Industry", with entry standards for enterprise size attracting the most attention. This standard stipulates that for steel enterprises crude steel output in 2008 should have been at least 1 million mt for general steel mills, and 0.5 million mt for specialty steel mills. CBI believes this standard will find it difficult to achieve its stated goals since authorities will face objections from local governments for the arbitrary measure of enterprise size as the key determinant in eliminating steel mills.

On December 12th, the Hebei provincial government announced the discovery of a significant iron ore deposit, estimated at 1.044 billion mt, was found in the Macheng Mine region.

As the end of 2009 nears, authorities are strongly promoting environmental protection audits in the steel sector.

China has become a net importer in crude steel and CBI believes this condition will continue during 2010, especially as China's finished steel exports were low during December.

CBI believes for 2009-2010, China's steel industry has no surplus capacity for crude steel or HR plate/coil, and that capacity utilization and inventory ratios are the key indicators of steel supply conditions.

CBI predicts China's average daily output of crude steel will be below 50 million mt in December due to mill maintenance at the end of the year.