Chinese production will grow by 3-5 percent in 2017

Despite the closures of small, aging factories, steel production in China is expected to grow 3 to 5 percent in 2017 from last year, according to a CISA official, as price increases prompted large players to smelt more metal.

This year, the world's largest steel producer, China, will receive about 840 million tonnes of steel, said the vice president of the China Iron and Steel Association (CISA). Last year, the country produced 808 million tons of steel.

Steel output at the association's large steel mills rose 6.8 percent in the first seven months of this year, while small steel mills were down 2 percent from last year.

This comes after the closure of 120 million tonnes of low-tech steelmaking facilities in the first half of this year and an ongoing series of environmental inspections to tackle pollution. The Chinese steel sector is modernizing and the industry concentration ratio is growing.

Of the 808 million tonnes of steel produced last year, only about 36 percent came from the 10 largest steel mills in China, and their share is expected to rise this year. China is seeking to simplify heavy industries in order to reduce its debt burden and produce more valuable products.

Export prices for steel products in the first seven months of the year rose 43.3 percent to $ 686 per tonne over the same period last year, CISA reported. Steel rebar prices in Shanghai are up nearly 50% this year as the market anticipates lower supplies due to tight capacity constraints and environmental audits.

The rise in prices has led to skyrocketing profits at Chinese steel mills. Net income of Chinese steel companies rose 390 percent in the first seven months.