According to figures from industry consultancy Mysteel, China’s daily crude steel output reached 1.646 million tonnes in the first 10 days of December, down 1.5 percent from the end of November.

While daily output has slowed slightly amid a seasonal lull in end-user demand, the figure remains much higher than the January-November average of 1.55 million tonnes, with mills and steel traders building stocks before a series of price hikes in January.

Total output from January to November reached 518.177 million tonnes, up 12.1 percent compared with the same period last year.

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.

It is said from Roger Agnelli (Vale CEO) Wednesday that Brazil’s Vale, the world’s largest iron ore miner, isn’t in talks with Chinese steel mills on benchmark price of iron ore in 2009, but will continue to sell iron ore to China at prices concluded on interim contract.

Earlier, Rio Tinto reached an agreement with Japanese and Korean steel mills on a 33 percent price cut for iron ore and Vale also agreed on a 28 percent price cut for this year. Chinese steel enterprises rejected the above price cuts.

However, Vale is still respecting the interim price agreement it reached with Chinese steel mills, said Roger Agnelli.

Although steel prices in China dropped sharply in August, steel output is still on the rise. The domestic 77 main steel enterprises recorded an operating rate of 90.9 percent this month, compared with 87 percent in July.

According to the latest data from the China Iron and Steel Association, the country’s mid- and large-sized steel companies produced about 1.67 million tons of crude steel per day in the first ten days of August, refreshing the record again.

An analyst with Umetal noted that prices of imported iron ore reached the peak in early August, followed by a 15 percent fall responding to the drop of steel prices.

China’s major steel plants have recently raised their ex-factory prices for September, which foretells that they are still optimistic about the steel market in the following two months.

Market analysts note that China’s iron ore demand will continue rising along with the growing steel output.

It is reported from China Metallurgical News that recently Q2 economic climate index has been released by www.ce.cn and National Bureau of Statistics of China posting at a lower level.

Mr Lixinchuang executive VP of CMIPRI said that the small and medium sized steel enterprises presented a better performance than the large ones this year.

Mr Li said these 10 industrial indices, like steel output, price index, export volume, sales revenue, tax incomes and profits etc entirely reflected a lower level in large and medium steel enterprises.

Mr Li revealed that the top 10 profitable enterprises were almost medium and small sized steel enterprises during January to May this year.

The CISA surveyed 71 large and medium sized steelmakers eyed an output reduction of 3% in half year period, but a 20% growth for the outsider enterprises.