BEIJING, Jan 22 - Rising raw material costs along with the recovering economies of the United States and Europe will provide "strong support" for steel prices in China in 2010, the country's steel industry body said on Friday.
But in a summary of industry prospects for 2010 posted on its website, the China Iron and Steel Association said overcapacity and international trade barriers could still hurt local mills, and product prices were still likely to be volatile this year.
"The foundations of the economic recovery are still relatively weak, the effects of the financial crisis still persist, growth in major economies has slowed and problems like flat consumption, trade frictions and low utilisation rates have still not shown any clear improvement," the document said.
Local steel mills face considerably higher transportation, fuel and raw material costs in 2010, and rising resource taxes together with other reforms aimed at improving efficiency and protecting the environment will also add a huge burden, CISA noted.
CISA, which represents about three-quarters of China's total steel capacity, has been noticeably more bullish about the prospects for the industry in 2010 after routinely warning last year that "blind expansion" and "disorder" was hurting profits and undermining the country's negotiating position with foreign iron ore suppliers.[ID:nTOE5BM02D]
CISA did not refer to the prospects for this year's benchmark price talks with Australia's Rio Tinto <RIO.AX> and BHP Billiton <BHP.AX> and Vale <VALE5.SA> of Brazil, but it said last month that it expects the three miners to demand a 20-30 percent rise in iron ore prices in 2010.