China plans to bring steel capacity down to below a billion tonnes by 2025 – report

China plans to lower its steel-making capacity to below one billion tonnes by 2025 by shutting down more outdated plants, as demand is expected to fall gradually.

Steel capacity surplus has seen Chinese companies make losses and the government said in 2016 that it would shut down 150 million tonnes of annual production in five years to raise profitability and utilisation rates.

China’s capacity then was estimated at 1.2 billion tonnes, Reuters reported.

It quoted Yu Yong, president of the China Iron and Steel Association (CISA) and chairman of the state-owned Hebei Iron and Steel Group, as saying that as much as 120 million tonnes of annual crude steel capacity had already been closed, allowing average profit margins among CISA members to recover to 4.7 percent last year.

“On the basis of China’s achievements in cutting capacity, China will use methods such as the law, market forces, financial instruments and also mergers and acquisitions to continue easing overcapacity,” Yu said, according to a transcript of his speech published last week by China Metallurgical News, a CISA-backed publication.

He said China would aim to keep utilisation rates at around 80 percent. They fell to less than 70 percent in 2015, Reuters said.

China has said it aims to aims to shut down close another 30 million tonnes of capacity this year.

“In the future, China’s overall steel demand will fluctuate downwards and overcapacity is likely to persist for a relatively sustained period of time,” Yu warned.

China produces as well as consumes half of the world’s steel production and has been blamed for dumping its products in various markets, prompting governments to impose anti-dumping duties, as prices fell across the globe a couple of years ago.

Since then, China has been forced to cut capacity and ensure fair trade practices as it has come under tremendous pressure from the United States, the European Union and other countries.

Shekhar Ghosh is a communications consultant and and former journalist, who has edited and written for publications such as like Business India, Business Standard, Business Today and Outlook.

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