China's Steel Potential Rises As Demand Falls

An alarming picture of overcapacity is observed in the Chinese steel market, which could have implications for steel prices around the world.

When the problem of overcapacity arises in Europe or the United States, domestic producers suffer and domestic prices are depressed, but the consequences rarely extend far beyond the region.

But partly because of China's dominance of the steel sector - producing more than half of the world's steel - and partly because Chinese manufacturers use exports to dump excess production when the country produces more than it consumes, the rest of the world is feeling the impact of increasing low-cost exports. metal products.

China is participating in a multi-year program to cut outdated, more polluting steel facilities. New additions were allowed only on a replacement basis, but an analysis of the situation shows that businesses that had been closed for several years but were not phased out were allowed to build new, much more efficient smelters.

Specifically, the report states that the net increase in production capacity in China will be 37.65 million tonnes per annum between 2019 and 23, of which 34.88 million tonnes per annum is to be commissioned in 2019. This brings China's total crude steel production capacity to around 1.2 billion tonnes per year by the end of this year.

In September-October of this year alone, China approved eight projects to replace steel capacities, as a result of which 17.18 million tons of pig iron per year and 13.56 million tons of steel per year will be put into operation in the next 3-4 years.