A low-emission production facility for steel wire in Dalian, Liaoning province. According to analysts, the government's drive for industry consolidation by moving from inland to coastal areas provides opportunities for equipment suppliers. [Photo / China Daily]

Equipment supplier aims to take advantage of growing demand

BEIJING - Danieli & C Officine Meccaniche SpA, one of the world's leading equipment suppliers for the metals industry, said it will significantly increase its investment in China to cash in on the growth in demand coming from the government's efforts to adjust the industry's structure.

The Italian company's total investment in China will reach 130 million euros ($188 million) by 2012, up from the current 80 million euros, Bavaresco Matteo, CEO of Danieli China, told China Daily.

He said the increase is due to the booming demand coming from increased steel production and the country's steps to upgrade the industry to meet goals in energy conservation and emission reduction.

Danieli China employs more than 1,000 people at its facilities in Beijing and Changshu, Jiangsu province. It is a business leader in mini-mills, long-product casting and rolling plants, and among the frontrunners in the flat-product and iron ore sectors.

Matteo said more than 70 percent of the company's clients are large, State-owned steel mills, including Shanghai Baosteel Group Corp and Shougang Group.

"And now there is a trend of more and more small and medium-sized Chinese steelmakers coming to us because they also want efficient equipment to reach the energy-saving and emission targets," he said.

"For example, our direct-reduction iron technology can cut about 50 percent of the emissions, compared with traditional technologies," he said.

Xu Xiangchun, a senior analyst at Mysteel.com, a steel industry website and consultancy company, said the government's drive for industry consolidation by moving from inland to coastal areas also provides opportunities for equipment suppliers.

But he also said the steel industry is entering a low-profit period, which will weigh on investors' enthusiasm for the industry.

According to data from China Iron & Steel Association (CISA), the profit ratio in the Chinese steel industry from January to May averaged 2.91 percent, far behind the nation's industrial average rate of 6 percent.

The prices of steel products rose 14.8 percent on average from January to May compared with last year, while imported ore prices surged 47.8 percent.

Li Xinchuang, vice-secretary general of CISA, previously said that China's steel output could hit a record 700 million tons, despite the sluggish market and low profit rate, because the country will continue its high fixed-asset investment through the year, with construction beginning on 10 million affordable houses.

Julian Kettle, head of metals research at Wood Mackenzie, said a slowdown would be inevitable from 2020, following the growing dominance of construction and the building of 36 million affordable homes called for in China's 12th Five-Year Plan (2011-2015).