CHINESE CAPACITY CUTS YET TO AFFECT
STEEL OUTPUT - MEPS
China is responsible for almost half of global crude steel production.
Consequently, actions taken by the country’s steelmakers strongly influence the
steel market, worldwide.
In recent times, Chinese suppliers were accused of setting their exports at
remarkably low prices. Global steelmakers were often forced to offer their
output at low margins or, on occasion, below cost. As a consequence, North
American and European steelmakers lodged a number of trade petitions, last year,
to limit the direct impact of Chinese imports. However, this month, several US
and European service centres bemoaned the shortage of Chinese cold rolled and
hot dipped galvanised coil. With very few third country suppliers willing to
fill the void, left by China, regional producers have raised transaction prices
for these two products.
The Chinese steel sector has stated its intent to reduce excess manufacturing
output to address the issue of global overcapacity. The government pledged to
remove between 100 and 150 million tonnes of steel capacity in the five-year
period up to 2020.
Recent government estimates indicated that as much as 80 million tonnes was
eliminated in 2016, against a declared target of 45 million. However, it is
unclear how this was achieved. The China Iron and Steel Association previously
remarked that last year’s figure included the closure of idled operations.
In fact, China’s National Bureau of Statistics reported that domestic crude
steel output, in 2016, increased by 0.6 percent, year-on-year. In the absence of
significant production cuts, MEPS believes that vast quantities of Chinese
material will continue to enter world markets. This is likely to maintain a
degree of negative pressure on global transaction values, in the medium to long
term, as oversupply continues.
Steel Review - January 2017 Issue
Free Sample copies
of MEPS Reports
the latest copy of International Steel Review here
up for free MEPS steel news alerts