Some Doubt China Pledge To Curb Excess Steel Capacity
06/08/2016 - China has promised to cut down its enormous steelmaking capacity by limiting new mills, eliminating antiquated mills and putting a final end to the so-called "zombie" operations that have returned from the dead.
The commitments came about during the annual U.S.-China Strategic and Economic Dialogue, held 6 and 7 June in Beijing.
The country already had said it planned to cut 100 million to 150 million metric tons of capacity. However, it outlined a package of structural reform policies that would enable its steel industry to be more responsive to market forces, according to the U.S. Treasury Department. And, it said, the country, will look to lop capacity by limiting new mills and shuttering outdated facilities.
Additionally, China said it would look to better align central government fiscal incentives for local governments to reduce capacity.
“In line with China’s supply-side structural reform agenda, China is to undertake further steps to ensure market forces are not constrained, so that its steel industry develops a stronger market orientation to enhance efficiency, and, in doing so, progressively reduces excess capacity. China is to give full play to the role of market mechanisms, adopt appropriate policy measures, and resolve excess capacity of challenged industries such as steel through rule of law and market-oriented approaches,” according to a joint statement from the two countries.
Thomas J. Gibson, president and chief executive of the American Iron and Steel Institute, said the commitments are certainly welcomed, but, he added, they are meaningful only if “they lead to real results that produce a significant net reduction in excess steel capacity in China.”
And some in the industry are skeptical that China will.
"I would love to believe it will lead to something, but I won't until we see evidence," said Holly Hart, the legislative director for the United Steelworkers union, according to the International Business Times.
In the meantime, the country is continuing to make and export a lot of steel.
In fact, Chinese steelmakers exported 46.3 million metric tons during the first five months of the year, a record amount, according to BloombergBusiness. The news service said sales rose on increased output tied to a jump in steel prices.
“Chinese exports will stay elevated because of higher production and also thanks to expanding demand for building materials in places such as Southeast Asia and Africa,” Wei Yingsong, an analyst at Mysteel Research, told Bloomberg.
The U.S. and China will take up the issue again during an OECD Steel Committee meeting, scheduled for 8 and 9 September, according to the Treasury.
The country already had said it planned to cut 100 million to 150 million metric tons of capacity. However, it outlined a package of structural reform policies that would enable its steel industry to be more responsive to market forces, according to the U.S. Treasury Department. And, it said, the country, will look to lop capacity by limiting new mills and shuttering outdated facilities.
Additionally, China said it would look to better align central government fiscal incentives for local governments to reduce capacity.
“In line with China’s supply-side structural reform agenda, China is to undertake further steps to ensure market forces are not constrained, so that its steel industry develops a stronger market orientation to enhance efficiency, and, in doing so, progressively reduces excess capacity. China is to give full play to the role of market mechanisms, adopt appropriate policy measures, and resolve excess capacity of challenged industries such as steel through rule of law and market-oriented approaches,” according to a joint statement from the two countries.
Thomas J. Gibson, president and chief executive of the American Iron and Steel Institute, said the commitments are certainly welcomed, but, he added, they are meaningful only if “they lead to real results that produce a significant net reduction in excess steel capacity in China.”
And some in the industry are skeptical that China will.
"I would love to believe it will lead to something, but I won't until we see evidence," said Holly Hart, the legislative director for the United Steelworkers union, according to the International Business Times.
In the meantime, the country is continuing to make and export a lot of steel.
In fact, Chinese steelmakers exported 46.3 million metric tons during the first five months of the year, a record amount, according to BloombergBusiness. The news service said sales rose on increased output tied to a jump in steel prices.
“Chinese exports will stay elevated because of higher production and also thanks to expanding demand for building materials in places such as Southeast Asia and Africa,” Wei Yingsong, an analyst at Mysteel Research, told Bloomberg.
The U.S. and China will take up the issue again during an OECD Steel Committee meeting, scheduled for 8 and 9 September, according to the Treasury.
