Reuter reported that China's steel exports are recovering ahead of a one week holiday in October 2007 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 USD 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 2007.

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

China¡¯s National Development and Reform Commission said recently that 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 2007, the lowest monthly export figure since March, had stopped prices from rising, although industry watchers said exports should be watched closely in coming months.

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

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

An executive at one of China's top shipping companies said "For September, exports are very strong. Some are saying that export taxes may change from the start of October 2007."

Official data showed the China's August steel product exports were down at 5.38 million tonnes, compared with 5.94 million in July 2007 and a record 7.16 million tonnes in April 2007. 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 jerking up China'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, China 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 China's iron ore imports totalled 250.81 million tonnes during the first eight months of this year, up 14.5%YoY with shipments from distant Brazil up 28.0% at 62.58 million tonnes.

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

Officials and analysts said in addition to stocking up ahead of an expected price increase in 2006 some mills were purchasing more in the spot market amid shipment delays from Brazil and Australia.

Macquarie Research said in its China Commodities Weekly that "At present, Chinese steel mills are panicking about this shortfall in iron ore supplies leading to a strong rise in iron ore spot prices. It said referring to August 2007 iron ore imports which came in at 29.29 million tonnes down from 33.61 million in July 2007. The lower imports reflect serious production delays in Brazil and Australia, plus the diversion of some cargo to Europe.