HONG KONG: 's steel exports are recovering ahead of a one-week holiday in October, with many mills concerned that Beijing will again raise export duties to rein in the energy-intensive industry.

Industry officials said the mills expected another move possibly as soon as next month, especially as China's huge iron ore imports were pushing up the raw material's spot prices to record highs and driving freight rates to all-time peaks.

High spot Indian iron ore prices, which have nearly doubled so far this year to around $155 a tonne, would make it difficult for Chinese steel mills to fend off a jump in the 2008 iron ore price talks, expected to start in October.

"At the moment, we export too much, making supply in the domestic market tight," said Li Xinchuang, vice president of China Metallurgical Industry Planning & Research Institute.

The National Development and Reform Commission said on Monday tight supply had helped push up prices of steel products over the past two months amid strong domestic demand and low stocks. A drop in exports in August, the lowest monthly export figure since March, had stopped prices from rising, although industry watchers said exports should be watched closely in coming months.

The commission did not mention any possible policy change in a report published on its Website (www.ndrc.gov.cn).

"The government is not too keen on export quotas. But I am sure cannot export as much next year. We will still export but not too much," said Li.

Despite higher export duties for steel introduced this year, shipping officials said exports had been on the increase this month, helped by strong international prices particularly in Europe and the Middle East.

"For September, exports are very strong," said an executive at one of China's top shipping companies. "Some are saying that export taxes may change from the start of October."

Official data showed the country's August steel product exports were down at 5.38 million tonnes, compared with 5.94 million in July and a record 7.16 million tonnes in April.

Strong exports came on the back of further expansion in the country's crude steel output, which was expected to be close to 500 million tonnes this year, despite
Beijing's efforts to slow the expansion. This is***up 's iron ore imports a lot faster than global output, paving the way for more price rises next year.

Ahead of the annual iron ore price talks, further reduced the number of licensed iron ore importers by 6 to 112 to curb imports to small steel mills, which Beijing has ordered to shut down.

Customs data showed 's iron ore imports totalled 250.81 million tonnes during the first eight months of this year, up 14.5 percent year-on-year, with shipments from distant up 28.0 percent at 62.58 million tonnes.

"This year, total production will be nearly 500 million tonnes. From such a high level, how can continue to increase the output a lot more?" said Li. "Such high iron ore prices are not good for the stable and sustainable development of the industry."

In addition to stocking up ahead of an expected price increase next year, officials and analysts said some mills were purchasing more in the spot market amid shipment delays from and .

"At present, Chinese steel mills are panicking about this shortfall in iron ore supplies leading to a strong rise in iron ore spot prices," Macquarie Research said in its China Commodities Weekly.

Referring to August iron ore imports, which came in at 29.29 million tonnes, down from 33.61 million in July, it said: "The lower imports reflect serious production delays in and , plus the diversion of some cargo to Europe."

Source: Reuters