POWER shortages in China in the coming months will have some impact in curbing the expansion in steel production, according to the China Iron and Steel Association.

"Possible power rationing will help control overall steel output and ease the oversupply in the domestic market," said Luo Bingsheng, deputy party secretary of the CISA, yesterday.

This year's power shortage began in March, well before the peak summer consumption season, after surging coal prices eroded the profitability of power generators and also due to insufficient generation capacity and transmission problems.

This summer's power shortage could be worse than 2004 when the country sweltered through its worst crunch in decades, the State Grid Corp of China said last week, adding it will extend the scale of power rationing to industrial users during the period.

The steel industry accounted for 11.5 percent of the nation's total electricity consumption in March, Luo said at a Shanghai Futures Exchange's annual derivatives conference.

"Power rationing to the steel sector is unavoidable," he said. "The impact on the steel industry will be mainly from June to September."

Luo also urged that power rationing should target less efficient mills so that obsolete capacity could be phased out more quickly.

China's steel production in 2011 will exceed 680 million tons, up from 627 million tons last year, Li Xinchuang, deputy secretary general of CISA, said at the same conference.

Based on the average daily output of 1.93 million tons in the first quarter of this year, the National Development and Reform Commission last month projected China may produce 700 million tons of crude steel this year.

The aggregate profit at China's 77 largest steel makers fell an annual 2.1 percent to 32.9 billion yuan (US$5.1 billion) in the first four months of the year, Luo said.