China plans to increase efforts to reduce overcapacity in its steel and coal industries after falling behind schedule in the first seven months, helping lift steel prices to their April highs yesterday as traders bet that supply will tighten.
The world’s biggest steel producer only managed to hit 47 percent of its full-year capacity reduction target for the metal through last month, and 38 percent for coal, the top economic planner, China’s National Development and Reform Commission (NDRC), said yesterday.
Some regions have wavered in their determination to trim capacity after a recovery in prices this year, spokesman Zhao Chenxin (趙辰昕) said at briefing in Beijing.
WEAK GROWTH
Industrial commodities have rallied this year after China’s policymakers boosted stimulus to stabilize an economy that has seen its weakest growth in decades.
The government’s plan to cut as much as 150 million tonnes of steel capacity over five years as part of its so-called supply-side reforms have raised prices and spurred mills to increase output to capture higher margins.
“The recent pick-up in steel and coal prices has swayed the determination of some enterprises and regions in cutting steel and coal capacity,” Zhao said. “The NDRC will undertake measures to speed up the progress of capacity reductions.”
The price of reinforcement bar climbed 3.8 percent to 2,669 yuan (US$403.02) per tonne on the Shanghai Futures Exchange by 1:39pm, set for the highest close in about four months. The benchmark steel product has advanced 50 percent this year.
Coke futures yesterday surged 6 percent on the Dalian Commodity Exchange, while coking coal rose 1.9 percent.
TARGETS
China plans to eliminate 40.8 million tonnes of crude steel capacity this year. About 19 million tonnes has been cut through last month, Zhao said.
It has also reduced coal capacity by about 86 million tonnes, compared with an annual target of 226.8 million tonnes.
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