China Admits Overcapacity Not Yet Falling in Bloated Steel Sector

Massive overcapacity in China’s steel industry is not yet falling, a vice minister said on Monday, as the country’s leading steel companies conceded that current output was unsustainable and blamed the restart of mills previously shut.

China is facing anger and calls for trade penalties to block its exports by global rivals, who say it is dumping cheap exports after a slowdown in demand at home.

The world’s biggest steel producer has vowed to cut production capacity by 100 to 150 million tonnes over five years from around 1.1 billion tonnes, although its efforts have been complicated by a recovery in domestic steel prices.

“Prices have been improving since the end of last year but there hasn’t been any fundamental change in the underlying conditions of the market and no improvement in overcapacity,” Vice Minister of Industry Xin Guobin told a conference, adding that protectionism by other countries was not the answer.

China’s steel production fell in April from March, but average daily production actually increased from 2.279 million tonnes to 2.314 million tonnes, a record high, according to Reuters calculations based on official data released on May 14.

France and Germany last week urged fellow EU members to tighten trade defenses to protect the bloc’s companies against imports, such as a recent surge of Chinese steel products.

While China’s crude steel output dipped 2.3 percent in 2015, production rebounded in March and April this year. China has rejected suggestions the jump was mostly due to so-called “zombie” enterprises returning to the market in order to profit from the higher market prices.

#Reuters

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