China will accelerate the closure of steel plants?

In the first half of 2016, China closed 13 million tonnes of production capacity in the metallurgical industry. This represents only 30 percent of the planned cut for this year. However, the Deputy Minister of Industry and Information Technology said that, as planned, the acceleration should take place in the second half of the year in order to implement the liquidation plan of up to 45 million tons. this year.

China already has a track record of eliminating excess production capacity, but the process is much slower than other market-based countries. China is planning, nevertheless, a significant reduction in capacity in a number of industries, including metallurgy. Over the past five years, 90 million tons of capacities have been closed, and in the future until 2020, the elimination of 100 to 150 million tons. Overproduction in China is estimated to be over 400 million tonnes.

According to the China Iron and Steel Association (CISA), 2015 was the worst for the steel segment in China. Losses in this industry exceeded 100 billion yuan, or 15.5 billion dollars, which is 24 times more than in 2014. However, 2016 started off much better for the sector due to an unexpected increase in demand for steel products and hence prices have also increased. CISA reports that from January to May, metallurgists are improving profitability and significantly fewer companies are posting losses. The largest companies generated 8.736 billion yuan in profits, seven times higher than last year.