S&P Global Platts estimates that expansion of steel production capacity in China is likely to peak in 2019 as new production starts outpacing old closings by one year, despite the government's four-year industrial renewal program and reduction in the supply of steel products.
Chinese steel mills are allowed to build new facilities only if they replace existing outdated facilities of similar capacity. But with most of the old capacity slated for decommissioning in 2019 has been idle or closed for some time, the new plants will lead to a significant increase in total steel capacity this year.
Platts calculates, based on government announcements of permits for new capacity, 51.1 Mtpa of new crude steel capacity will be commissioned in 2019, subject to the closure of obsolete 51.9 Mtpa facilities .
However, 35.7 of these 51.9 million tons per year were already suspended earlier until 2019, so only 16.2 million tons will be closed during the year, which is much less than the volume of new capacities introduced, and thus , parity between the opened and closed industries has not been achieved.
Platts estimates that the commissioning of new facilities in 2019 will add 34.9 million tonnes a year of new capacity, bringing the country's total steel production capacity to around 1.18-1.2 billion tonnes a year.
But already in 2020, China will put into operation new production facilities with a capacity of 91.9 million tons per year and will close the old ones with a capacity of 91.2 million tons per year, of which only about 12 million tons per year were closed earlier, which means that the replacement-closure rate will decrease.
In the future, the course taken by the government towards the planned reduction in steel output and the renewal of production will continue.
At the same time, the growth rate of steel production will continue after 2019, since the new blast furnaces being commissioned are more efficient than the old ones. In addition, adding more scrap to the production process and using high quality ores can increase iron and steel output by 10-20%.
China's steel production in January-July 2019 increased 9% year-on-year, or 48 million, to 577 million tonnes.
