China will prevent shuttered or illegal steel plants from returning to the market, according to an official at the nation’s lead economic planning body, signaling a commitment to a campaign by the world’s top producer that has helped to raise prices.
The nation will stick to its capacity-cutting mission this year, Chinese National Development and Reform Commission Vice Chairman Ning Jizhe (寧吉?) told reporters at a weekend briefing during the 19th National Congress of the Chinese Communist Party.
Separately, commission Chairman He Lifeng (何立峰) said cuts to steel and coal capacity had resulted in more than 1.1 million workers being “re-employed” after job cuts.
China has been ordering illegal steel mills to close, both to reduce overcapacity and to clean up the environment, and officials plan a battery of further output cuts at remaining plants over the winter in key production centers.
Benchmark steel prices have advanced this year, with spot reinforcement bar last month gaining to the highest level since 2011.
The nationwide drive has also triggered a drop-off in exports from China, easing the pressure on producers elsewhere.
“State and local governments have taken supply-side reforms of overcapacity in the domestic steel industry extremely seriously,” Atilla Widnell, head of market intelligence at Mysteel Singapore Pte, told Bloomberg.
The effect is material both to the tightening of the domestic balance, and to markets outside China due to the sheer volume the country exports, Widnell said.
Steel production sank from a record last month, hitting the lowest in at least six months, as the campaign to cut excess capacity and the anti-pollution drive touted by Chinese President Xi Jinping (習近平) in his policy address to the congress made their mark.
Output was 71.83 million tonnes last month from 74.59 million tons in August.
At the same time exports have been dropping, slumping to 5.1 million tonnes last month, the lowest total since February 2014.
Imports of Chinese steel into the US are expected to decline next year, Cleveland-Cliffs Inc chairman Lourenco Goncalves said.
“China is finally doing what they said they would do,” Goncalves said in an interview on Friday. “By acting to cut pollution they’re cutting a lot of excess capacity.”
Spot reinforcement bar, a basic product used in construction, has increased 26 percent this year after hitting an almost six-year high of 4,396 yuan (US$662 at the current exchange rate) a tonne last month, according to Antaike Information Development Co (安泰科信息開發).
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