International Steel Mills

China Wants Capacity Cuts Recognized

August 1, 2017

China cut crude steel capacity by 42.39 million metric tons in the first half of 2017–about 84 percent of its 50 million metric ton goal for the year–but steel production rose 4.6 percent to 419.75 million tons during the same period. Shutdowns to capacity do not include the removal of 100 million tons of illegal low-grade steel production in the first half.

Steel prices in China benefited from the capacity reduction, but Jin Wei, president of the China Iron and Steel Association, warned producers that steel profits continue to be low as the industry struggles with steep cuts to exports resulting from numerous foreign trade restrictions. Steel exports from China fell 28 percent in the first half of the year, according to customs data.

Average steel price for CISA member companies was approximately $493 per ton in the first half, a 49.1 percent increase, according to official data, but average profits were only $23.81 per ton, said Jin at an industry conference last week. Some members barely broke even, while others lost money, he added.

“Margins in the steel industry are still low compared with other major industrial sectors, and producers still face problems getting financing and high costs when they do,” said Jin.

“The international market should treat the rise of China’s steel industry in a fair way, and the country’s determination and efforts to cut capacity should be recognized,” Li Xinchuang, president of the China Metallurgical Industry Planning and Research Institute, told the Global Times on Friday.

China’s targeted removal of 100 million to 150 million metric tons of excess steel capacity by the end of 2017 has been almost reached, according to the National Development and Reform Commission. More plant closures are expected to occur as new rules targeting pollution are released later this month.