SHANGHAI, Mar. 12 (SMM) - Kashgar, one of the least developed region in northwest China, has enter a new stage with the investment launced by Shandong Steel. Kashgar Steel was ignited on 18th Decemberand was put into operation in 7th March.

Kashgar Steel is the first steel mill in Kashgar, with the construction of a 1,000 m³ blast furnace, a 100 million tonne converter and rolled steel production facilities (rebar and wire rod). The annual production is expected to reach one million in the first stage, and finially 3.6 million capacity will be achieved in the final stage. The total capital investment in the first stage is about RMB 3 billion and the total capital investment will reach RMB 12 billion in the final stage.
 
According to statistics, there are 11 projects under construction and under planning in Xinjiang, increasing local pig iron capacity from 12.32 million mt in 2011 to 36.21 million mt in 2016, with average annual growth rate at 24%. It is confirmed that 25.69 million mt of capacity will be put into operation before 2014, and operation of new capacity after 2014 remains unknown. It is reported that iron ore concentrate output in Xinjiang will increase to 27 million mt in 2014, but demand is 41 million mt, leaving 14 million mt of supply deficit. SMM believes that the major challenge for development of steel industry in Xinjiang is shortage of raw material supply.
 
The supply deficit will be offset by imports of iron ore from abroad, mainly from Ukraine, Outer Mongolia and Russia. It is not economical to ship iron ore from coastal ports to Xinjiang, as shipping charges will exceed RMB 400 if shipping distance is further than 3,000 miles. 
 
At present, Xinjiang imports for iron ore are around 3-6 million mt of iron ore from abroad every year. However, considering the high demand of 14 million mt/yr and limited and inconvenient railway shipping capacity, Steelease believes that steel producers in Xinjiang will be still challenged by raw material supply shortage.