China 2012 Steel Demand Growth May Fall 50% From 3-Year Average -Moody's

BEIJING, Mar. 12 (Dow Jones) -- China's steel demand is likely to slow to 5.7% this year, around half the average over the past three years of 11.1%, due in part to the government's moves to slow economic expansion, Moody's Investors Service senior analyst Jonathan Lee said Monday.

High input costs and obsolete output capacity are among the factors compounding the steel industry's consumption problems.

'If the government further slows the country's infrastructure construction or scales down its welfare housing projects, the demand for steel will weaken beyond what we have projected,' Lee said in a note.

Most of the infrastructure projects from the government's late-2008 CNY4 trillion ($630 billion) stimulus, which played a major role in buoying steel demand over the last three years, have already been completed, Moody's said.

'Facing a stalled market, Chinese steelmakers will have to cut capital expenditures, lower capacity utilization rates, and reduce selling prices to cope with market conditions,' Lee said.

Chinese steel mills face 'grave difficulties' this year due to Beijing's property curbs, Gu Jianguo, chairman of Maanshan Iron & Steel Co., told reporters Wednesday on the sidelines of China's annual legislative session.