China, the world’s largest steel producer, is working on plans to curb excess capacity as the nation faces “severe oversupply".
Deng Qilin, the general manager of Wuhan Iron & Steel Group, who is also the chairman of the China Iron and Steel Association, said in an interview that the government may have detailed plans to close obsolete mills, advance mergers and reduce the number of iron ore importers by the end of the year.
Steel prices in China have dropped 23% since reaching a 10-month high on August 4, as overproduction offset rising demand created by government stimulus spending. Deng Qilin said some steelmakers have incurred losses at current prices.
Deng Qilin said, “The government will impose strict measures to effectively close outdated mills and boost consolidation. We bigger players will surely benefit from such a move.”
Steel output in China reached a record this year as the government invested RMB4 trillion ($586 billion) in the economy, spurring public works building. The nation’s cabinet in August said it was studying curbs on overcapacity in industries including steel.
Bloomberg reports that Chinese steelmakers are facing rising import competition. According to Deng Qilin, Japanese manufacturers are “dumping” products in the country. Japan is the world’s biggest exporter this year, while China ranks only sixth and has turned into a net importer.