China's rolled steel production last year was up 21.5 percent from a year earlier.

　　Domestic mills produced 235.8 million tons, but imports rose 51.8 percent to 37.2 million tons. The value of imports rose 61.1 percent to US$19.9 billion.

　　Operating profit in the ferrous metal sector doubled to 59.4 billion yuan.

　　Strong domestic demand from the auto and mechanical manufacturing industries and powerful fixed asset investment boosted steel demand.

　　Imported steel prices spiked higher in the first quarter of 2004.

　　According to Metal Bulletin, cold rolled import prices rose 29.5 percent year-on-year to US$615 a ton and hot rolled steel was up 47.6 percent to US$465. The National Bureau of Statistics' survey of steel inventory shows rolled steel inventory down 0.9 percent on a sales/output ratio of 100.1 percent.

　　The only steel product with major inventory build-up is mid-thick steel plate where inventory rose 38.8 percent year-on-year.

　　For 2004, we expect rolled steel demand to grow 13.3 percent to 295 million tons.

　　Domestic production is forecast to grow 12.1 percent to 259 million tons and imports to rise 21 percent to 44.3 million tons on the loosening of steel protection after the US dropped steel import safeguard measures.

　　But the steel industry faces surging coke and iron ore prices.

　　Iron ore imports surged 32.9 percent to 148.1 million tons, with total value growing 75.4 percent to US$4.8 billion, implying average purchase prices up 32 percent year-on-year to US$32.80 a ton.

　　Industry sources indicate 12 to 15 percent higher prices in 2004.

　　Coke prices in China went through the roof, with 2003's average coke export price soaring 61 percent to US$113.60 a ton.

　　(BNP Paribas Peregrine)