Chinese steel capacity increased by 36.5 million tons in 2016

A report based on a Greenpeace study indicates that Chinese steel capacity increased in 2016 despite government efforts to reduce excess steel production in various steel provinces. A study conducted jointly with Custeel, a steel consulting company led by China Iron and the Steel Manufacturers Association (CISA), shows that the country recorded a net increase in capacity in 2016. In addition, a total of ten Chinese provinces have increased capacity.

At the same time, according to the report, 72.48% of the reduced steel production capacity during the year was actually closed or idle. According to statistics, 26 provinces achieved a total reduction in production capacity of 84.9175 million tons of steel. This means that the provinces were able to achieve a shutdown of only 23,372,500 tons of production capacity throughout 2016, while reducing excess capacity. For example, reductions in excess capacity in Shanxi, Gansu and Guizhou provinces are associated with the elimination of obsolete equipment.

In addition, an increase in steel demand due to government stimulus measures and cutbacks in supplies due to capacity closures led to the restart of 49 million tonnes of previously suspended capacity. In addition, some 12 million tonnes of new capacity were added despite the government's plan of action to limit capacity. As a result, China recorded a net increase in capacity of 36.5 million tonnes during 2016. The three neighboring provinces of Hebei, Shanxi and Tianjin accounted for nearly 80% of the net increase in capacity.

A total of 85 million tonnes of annual steel capacity was shut down in 2016, clearly exceeding the national target despite a lack of efficiency in these efforts. According to official figures released by the Chinese administration, the country's total steel capacity was 1.1 billion tonnes in 2016, clearly lower than previous estimates, but still indicates a surplus of around 300 million tonnes. The National Development and Reform Commission (NDRC) expects to close another 45 million tonnes of steel production capacity in 2017.

The report calls on the Chinese government to immediately address the shortcomings of the 2016 overcapacity reduction efforts. It notes that most of the capacity elimination target set for the 2016-2020 period has technically been achieved. He warns that the remaining elimination of potential for 2017-20 looks much more modest if the targets are not increased. The report recommends the demolition of closed facilities to prevent future reboots in order to achieve a genuine reduction in production capacity.