China confirms plan to cut steel and coal production

China will use every means to cut steel and coal capacity this year, despite domestic producers' reluctance to cut output amid rising prices.

“As government leaders emphasize, we must fulfill the plan to reduce excess steel and coal capacity this year,” said Zhao Chenxing, a spokesman for the National Development and Reform Commission, “and at the end of the year, those who are unable to meet these goals will be responsibility ".

China plans to cut its steel production capacity by 45 million tonnes this year and cut coal production by 280 million tonnes. The plan is now beginning to bear fruit with improved operations at coal and steel mills. In the first five months of this year, China's steel production fell 1.4 percent from the same period a year earlier, while coal production fell 8.4 percent.

According to the China Iron and Steel Association, the factories, which are major players in the industry, reported a profit of 8.74 billion yuan in the first five months compared to a year earlier. About 28.28 percent of the association's members reported losses. For comparison, according to reports in 2015, 50.5 percent of factories had losses. However, improved market conditions discourage some producers from further cutting capacity, Zhao said. “All stakeholders need to keep a clear head to move firmly forward with the goal of reducing excess capacity,” he said.

Premier Li Keqiang agreed with European Commission President Jean-Claude Juncker that China and the EU would set up a group to monitor the steel trade and monitor Beijing's efforts to combat overproduction. Juncker made it clear that this idea is tied to Brussels' pondering of the possibility of granting China the status of a market economy. According to the data, China's economy grew 6.7 percent in the first quarter.

China has cut steel production capacity by 90 million tons over five years and has pledged to cut another 1 trillion to 1.5 trillion tons over five years by the end of 2020. The country's two leading state-owned factories, Baosteel Group and Wuhan Iron and Steel (Group), are planning a merger under the program.