Steel prices are anticipated to a big rise in the coming year – 2010, most iron ore producers are hiking their prices in China.

As an indicator for the steel market, the Baosteel Group Corporation (Baosteel) has raised January 2010 iron ore prices.

After the price adjustment, the main product prices of Baosteel have basically returned to their high level in 2009. The action was followed by Wuhan Iron and Steel (Group) Corp. (WISCO), Anshan Iron and Steel Group and other enterprises increasing their steel prices.

However, India witnessed another phenomenon this week when JSW Steel, India’s third largest maker of steel, has cut prices for flat products by Rs 500 a tonne in December.

Flat products are used in manufacture of automobiles and consumer goods such as refrigerators and washing machines. JSW has said it sees steel prices to be stable with an upward bias in 2010Baosteel said next year in terms of steel demand and the overall price, the situation will be greatly improved compared to this year, but the overcapacity issue will remain.

Next year’s domestic production capacity of the company may surpass 600 million tonnes. The company expects that next year China’s economic growth will rely more on domestic demand and growth in investment will be less than this year. Based on this premise, combined with reduction in vehicle purchasing tax and the possibility of continuing the home appliances to the countryside policy, the outlook for steel demand is optimistic.

Furthermore, as urbanization continues to advance, the demand for steel will be diversified, which will generate a new round of domestic steel demand. Relatively speaking, with the cooling down in investment in infrastructure, construction steel demand growth will slow in 2010.

According to Minister of industry and information technology–Li Yizhong, China, as the world’s top steelmaker, closed 16.9 million metric tons of obsolete capacity this year as part of an effort to ease domestic oversupply, .

The nation also shuttered 21.1 million tons of iron-making capacity; 800,000 tons of aluminum capacity; and 74 million tons of cement capacity, Li said today at a conference in remarks broadcast on the Internet. The figures beat targets set by the Ministry of Environmental Protection earlier this year.

China, also the world’s biggest producer of iron, cement and aluminum, is facing a severe oversupply of steel as mills expand faster than outdated plants are closed. The government is studying a “more feasible” plan to tackle steel overcapacity, Li’s ministry said on Dec. 3.

“The 2 percent cut in capacity by the Chinese steel industry is truly a spit in the ocean,” Michelle Applebaum, who runs a steel-research firm in Highland Park, Illinois, wrote in an e-mail. “Many of the country’s high-cost and polluting, older provincial mills continue to run for jobs rather than profitability,” said the analyst at Michelle Applebaum Research.

Steel capacity in China may have reached 700 million tons or more, Xiong Bilin, deputy director at the National Development and Reform Commission’s industry department, said on Dec. 3. The nation may need 549 million tons of the alloy this year, the China Iron and Steel Association said in November.

“Investment has risen too fast in some industries in recent years,” Minister Li said today in the Web cast. “There are blind expansions in steel and cement. A large amount of obsolete capacity needs to be closed.”

China had planned to shut 6 million tons of steel-making capacity and 10 million tons of iron-making capacity this year, the Ministry of Environmental Protection said on Jan. 13. The Ministry of Environmental Protection said on Nov. 13 that the government is planning measures to close plants in the steel, aluminum, coke, cement, paper and utility industries.